ROI-Aluminium supply shock revives long-idled Western smelters: Andy Home

Norsk Hydro ASA

10/07/2026 06:00

 (Repeats Thursday's column to additional subscribers without
any changes. The opinions expressed here are those of the
author, a columnist for Reuters.)
    By Andy Home
    LONDON, July 9 (Reuters) - The supply shock caused by the
Iran war is sparking old Western aluminium smelters back into
life. 
    In the U.S., Magnitude 7 Metals is reactivating the New
Madrid smelter in Missouri. 
    Across the Atlantic, Norwegian producer Hydro  NHY.OL  has
announced the partial restart of the Slovalco joint venture
smelter in Slovakia. 
    Both plants have been fully idled for several years, victims
of low aluminium prices and the energy price spike that followed
Russia's invasion of Ukraine in 2022. 
    The restarts are laden with political significance for
Washington and Brussels, both equally desperate to reduce import
dependency on a metal that is ubiquitous across a diverse range
of industrial sectors. 
    Neither will move the global dial much, but the return of
these zombie smelters shows how much has changed in the
aluminium market since Middle East hostilities broke out in
February. 
    
    BACK FROM THE DEAD (AGAIN)
    New Madrid, with annual production capacity of 263,000
metric tons, began operations in 1971, originally under the
ownership of Canada's Noranda.
    Idled in 2016, it was reactivated by privately owned
Magnitude 7 Metals in 2018 and closed again with little warning
in early 2024. The smelter had the dubious distinction of being
the worst-polluting plant in the country in 2019.  
    The plan is to restart one 75,000-ton-per-year(tpy) potline
by the end of the year, with the possibility of operations
ramping up further in 2027. 
    The resuscitation of New Madrid has undoubtedly been helped
by U.S. President Donald Trump's doubling of import tariffs to
50% last year. 
    The resulting premium for U.S. delivery has ballooned to
$2,375 per ton over the London Metal Exchange (LME) basis price
 CMAL3 .     
    But equally significant to New Madrid's revival is the rise
in the LME basis price from $2,200 per ton at the start of 2024
to $3,165 today, even after the recent and possibly premature
unwind of the war premium. 
    
    SLOVAK REVIVAL
    The Slovalco plant, owned 55.3% by Hydro and 44.7% by
Central Europe-focused Penta Investments Group, is also planning
to restart 75,000 tons of capacity. 
    The decision is predicated on a new power supply deal with 
state-owned hydropower utility Vodohospodarska Vystavba and a
compensation scheme for indirect carbon costs under the EU
Emissions Trading System (ETS).
    The latter is still subject to approval by the European
Commission. 
    Europe has lost around half of its primary aluminium
smelting capacity since 2022, which makes the restart a
significant win for both Slovakia and Europe. 
    However, high power costs, now combined with the European
Union's emissions regulations, still make for a highly
challenging operating environment for power-hungry aluminium
smelters. 
    Hydro noted that a restart of the remaining 100,000 tons of
capacity at Slovalco "will depend on (ETS) framework conditions
beyond 2030 combined with additional power contracts."
    
    WINDOW OF OPPORTUNITY
    The war in Iran has caused Gulf aluminium production to
slump by an annualised 2 million tons, reflecting both direct
missile hits on two plants and logistics constraints on others. 
    With Chinese production running up against the government's
45-million-tpy capacity cap, a market characterised by years of
oversupply has swung alarmingly fast into deficit. 
    LME stocks have been tapped to fill the resulting
supply-chain gaps, with total inventory, including off-warrant
metal, now below 400,000 tons. 
    The war has accentuated existing import dependencies in both
the U.S. and Europe, opening a window of opportunity for idled
capacity to fire back up. 
    How long this window stays open is a moot point. 
    Other parts of the global supply chain are also reacting. 
    China has been lifting exports of semi-manufactured products
such as bar, rods and foil to capitalise on the West's shortage
of metal. Product exports fell by 9.4% last year relative to
2024 but grew by 10% in the first five months of this year.
May's tally of 595,000 tons was the highest monthly count since
November 2024. 
    Chinese players are also pouring money into constructing new
smelting capacity in Indonesia. 
    One new project, Juwan with a capacity of 270,000 tpy,
reached full capacity in January, according to Macquarie Bank. 
    Another, the 500,000-tpy Adaro  ADMR.JK  joint venture, made
its first export shipments last month, according to Export
Genius, a trade data platform.
    Adaro aims to grow capacity to 1.5 million tpy, part of a
broader national production surge that could see over 10 million
tons of new annual capacity ramp up over the coming years. 
    This puts the 150,000-tpy combined restarts at New Madrid
and Slovakia in context, whatever their political significance. 
    Much now depends on what happens next in the Middle East. 
    The LME aluminium price has sold off aggressively on signs
of de-escalation and hopes of normalisation at the affected Gulf
smelters. 
    That's starting to look optimistic given the renewed U.S.
bombing campaign and Iranian retaliation.
    The window of opportunity for more restarts remains open for
now. 
     
  (The opinions expressed here are those of Andy Home, a
columnist for Reuters.)       
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 (Writing by Andy Home;
Editing by Marguerita Choy)
 ((andy.home@thomsonreuters.com, 44-207-542-4412 and on Twitter
https://twitter.com/AndyHomeMetals))