German aluminum producer Trimet Aluminium SE will increase production to full capacity at its smelters in France and Germany in the coming year. This is a sign that falling energy prices are helping Europe's aluminum industry recover from the brink of an existential crisis.
During the energy crisis, aluminum in continental Europe was one of the most affected industries. Due to soaring electricity prices and the large amount of energy required for aluminum production, more than half of Europe's aluminum production capacity is suspended. At the height of the energy crisis, the spot cost of buying electricity needed to make aluminum in countries such as France was more than five times higher than the price that smelters could get from selling aluminum. Today, according to media calculations based on spot electricity prices and typical electricity required to produce aluminum, electricity costs account for about a quarter of the selling price.
For the past two years, Trimet Aluminium SE smelters in Germany and France have been operating at less than 50% capacity utilization. The company said on Thursday it plans to increase production capacity to full capacity by mid-2025, with a target output of 540,000 tons per year. The company said it signed a long-term power supply contract with EDF last year over production plans for its French smelter.
Trimet Aluminium SE said in a statementhugelotto:"Loose conditions in the procurement market, especially falling electricity prices, now make it economically feasible to re-produce aluminum."
Electricity prices in Europe have fallen sharply from highs reached during the worst energy crisis in decades. Benchmark German electricity prices have fallen 32% in the past year, close to the five-year average. Coupled with stronger German economic data, people are optimistic that energy demand will recover.
Some smelters that are less affected by spot electricity prices have restarted production. Industries such as zinc and steel have also restarted production. However, due to the large amount of electricity required by the aluminum industry and the huge costs associated with capacity cuts and factory closures, there are concerns that aluminum production in Europe may never fully recover.