The boom in metal-intensive technologies like data centers and electric vehicles has made it a prime time to be in the US aluminum business.
Prices are booming. Part of that is because inside every data center are cooling units, server racks, radiators, and a litany of other pieces and parts made out of aluminum.
No wonder demand is high.
But data centers guzzle enormous amounts of power, and electricity prices are skyrocketing. In the US alone, electricity demand is expected to grow five to 10 times faster over the next 10 years than it did in the previous decade, per Bank of America.
For aluminum smelters, this is a problem. Producing aluminum is incredibly energy-intensive, and without cheap power, those smelters can’t operate.
If power weren’t enough of a problem, the sector is also facing pressure from overseas, where international competitors are boosting supply. Indonesia, already a major global supplier of bauxite, is steadily increasing its production of processed aluminum as it seeks to become a powerhouse, per Jefferies. China, the world’s largest producer of aluminum several times over, is doing the same.
The US aluminum sector, which is nearly dormant after years of shuttering smelters, is now attempting to build out more capacity as demand is racing upward. And that demand — from data centers to power transmission equipment — has supported stock prices. For example, shares of Alcoa Corporation (AA) and Century Aluminum Company (CENX), which operate the only domestic aluminum smelters left in the US, have both recovered from the April tariff market shock to post gains so far this year.
“In a world in which we are more energy intensive … it’s going to be built with aluminum,” said Charles Johnson, the president and CEO of the Aluminum Association trade group.
But just as Big Tech’s data center boom is sparking new demand for the metal, the industry’s insatiable desire for power — and its willingness to pay above market for it — is hampering any domestic build-out of smelting capacity and cutting into supply available for the AI arms race.
The process
Aluminum must pass through several stages to reach its final usable metal form that can be cut, bent, and shaped to form a cooling unit or battery-powered supply device. First, bauxite, an aluminum-rich mineral, must be strip-mined out of the ground. That bauxite is then converted to alumina, a purified aluminum oxide made by subjecting bauxite to a series of chemical reactions.
The final smelting process — turning alumina into aluminum by heating it up to more than 1,700 degrees Fahrenheit and then chemically separating out the material that will become metal — is extraordinarily energy-intensive. For every metric ton of produced aluminum, a smelter will consume roughly 14 megawatt-hours of electricity, enough energy to power the average US home for nearly a year and a half or drive a Tesla (TSLA) Model Y more than 50,000 miles.
If a new domestic aluminum smelter were to be built today, it would require the same amount of electricity per year as a city the size of Boston or Nashville, according to the Aluminum Association.
In theory, the industry is at its best levels in years. Solar panels, wind turbines, server racks, and climatization units inside data centers are all built with aluminum. In the electric vehicle market, where aluminum has begun to replace heavier steel, the amount of aluminum in US EVs is expected to grow by more than 12% by 2030. Aluminum is changing hands near its highest price in three years.
At Alcoa’s 2025 investor day, an analyst asked whether Alcoa’s leadership believed the company would be able to adapt its equipment quickly enough to keep up with the aluminum demand coming out of the AI industry. Finance chief Molly Beerman replied that while they may not be able to totally catch up with the specialized demands of the AI sector in the next couple of years, they would at least be able to make good progress.
Yet, despite the rising demand for aluminum, Big Tech’s power draw — expected to grow by 18% annually through 2030 in the US alone — is crushing the margins of aluminum smelters, who can’t offer the same expensive payments for power as data center developers, said Beerman.
To operate with healthy margins, aluminum smelters require a 10- to 20-year electricity contract at a fixed cost of around $30 to $40 per megawatt-hour, according to several aluminum executives. However, “We are now today competing with Amazon and Microsoft, who are willing to pay over $100 per megawatt hour for power,” Beerman said at an industry event in September.
Century Aluminum has tried to get ahead of the trend, addressing the problem by looking for guaranteed power. In October, the aluminum smelter signed a long-term power contract with a utility company in Mt. Holly, S.C., that guarantees a stable supply through 2031, mitigating the risk of a spike in electricity prices.
But the demand for power from data centers is so intense that Alcoa is considering selling off some of its assets to Big Tech companies that may get more use out of the smelters’ power generation equipment than the metal they produce.
Spokespersons for Amazon (AMZN) and Microsoft (MSFT) told Yahoo Finance the companies are working to reduce the carbon intensity of their construction and evaluating what building materials they are using. Oracle (ORCL) declined to comment. Alphabet (GOOG) and Meta (META) did not respond to requests for comment on the effects of their energy intensity on the aluminum industry.
More troubles ahead
Given the increased supply coming onto the market, per-ton prices of aluminum are likely to fall roughly 15% by the fourth quarter of 2026, to $2,350 per ton, and not return to current levels until 2030, according to a recent note from a team of Goldman Sachs analysts, cutting into smelters’ margins by reducing how much they can charge a buyer.
Trends in the US aluminum industry speak for themselves. Right now, there are only six smelting sites left in the country — and only four of those are commercially operating, producing around 670,000 tons of the metal in 2024, or just under 1% of global production on the year. Even if they were running at full capacity, US smelters would only be able to meet about one-third of domestic demand, according to the Aluminum Association.
If the US wants more aluminum smelters to boost domestic stockpiles and reduce the US industry’s dependence on foreign suppliers, the government is going to have to step in, according to the Aluminum Association.
“Rebuilding America’s aluminum smelter base will require significant investment, long-term planning, and strong collaboration between government and industry,” the Aluminum Association said in a statement to Yahoo Finance. The trade group estimates the industry would need five years, five new smelters, and an investment of $25 billion to meet current domestic demand.
The White House has begun discussing rebuilding a domestic supply chain for aluminum. Over the summer, the Trump administration levied a 50% tariff on aluminum imports, and Washington has talked about rebuilding the US’s domestic smelting industry.
The topic has also become increasingly important as trade tensions escalated between Washington and Beijing throughout 2025. As in rare earths, China dominates the global aluminum market. The world’s second-largest economy is also the second-largest miner of bauxite, behind only Australia, and is the world’s largest importer of the material. China also controls roughly half of all alumina production and smelts between 50% and 60% of the global supply of aluminum. It is the world’s largest exporter of finished aluminum products many times over and the third-largest importer.
But bauxite, or aluminum ore, reserves are practically nonexistent in the US, and it’s been 45 years since a primary, or non-recycled, aluminum smelter was built domestically. Right now, the US imports about two-thirds of its primary, or non-recycled, aluminum from Canada.
Is help on the way?
In May, the United Arab Emirates-based company Emirates Global Aluminum announced plans to build a new aluminum smelter in Oklahoma with a capacity of about 600,000 tons per year, nearly doubling current US domestic production. Century Aluminum said in August that it plans to bring its Mt. Holly plant back online after years of sitting idle as part of its long-term power deal with a local utility.
But “the key constraint” these companies, and the broader industry, will run into is “power supply,” said Jefferies analysts Shuhang Jiang and Johnson Wan in a recent client note. The rapid run-up in demand, Alcoa CEO William Oplinger said, has complicated smelters’ ability to lock in the power contracts they need to operate viably.
Still, the aluminum industry is taking a bullish view that as the market becomes aware of the demand for aluminum from the data center industry, prices for the metal will begin to rise, widening smelters’ margins. But, Oplinger said, the math isn’t there yet.
“We have not yet seen significantly competitive energy prices available for the long term in the United States,” said Oplinger. “In fact, the opposite of that is occurring.”
