Smelters will struggle to compete with data centres on energy

US aluminium producer, Alcoa, has said that data centres represent a threat to any future smelters, due to energy costs. Data centres consume huge amounts of energy and are prepared to pay higher rates, making it harder for smelters to negotiate power costs.

Speaking at Citi 2025 Basic Materials Conference last week (Dec 3), Molly Beerman, Alcoa’s Executive Vice President and Chief Financial Officer, said while aluminium smelters in the US typically pay $30 to $40 per megawatt hour, data centres are prepared to pay more than $100 per megawatt hour.

“The smelters that remain today, and primarily, we’d start with the US, you can see our smelters that we have on the West Coast of the US are closed. They’re done. They’re gone. They could not get the power.”

But she added that aluminium smelters are the hub of the communities where they are located, and cited Alcoa’s Massena, New York facility as an example.

“Alcoa is the primary employer in that community. We’re vital to the employment and the economic sustainability. We have a partner in the New York Power Authority. They recognise the importance. We have great political support.

“Where you see smelters thriving and surviving today, it’s about where they are geographically located, how much they’re contributing to the local economy, to employment, and how important the aluminium industry is.

“We see that in Québec, Canada, completely behind the aluminium industry. In Iceland, the power was actually developed for the aluminium industry there.

“So, I don’t think we’re head-to-head competing with the data centre on our existing smelters, but certainly, any new smelter capacity is going to have to struggle with that competition, because the other players are going to be paying a lot more than is needed for an economic smelter at that $30 to $40 per megawatt level.”