The energy industry attended ADIPEC 2025 with a familiar problem and left with a sharper one. Every major conversation in Abu Dhabi, whether on investment flows, upstream fuel security, grid volatility or the rapid buildout of digital energy systems, pointed to a structural shift already underway: the cost and carbon advantage of aluminium is no longer determined by the smelter, but by the energy system surrounding it.

This is the unavoidable conclusion when the power consumption map from 2023–24 (Part 1 of this series) is layered against the messages coming out of ADIPEC. Smelters are now operating in an environment where energy is both their largest risk and their only meaningful decarbonisation lever.

And as the global energy transition collides with supply security concerns, the aluminium sector finds itself exposed on multiple fronts — from fossil-fuel price cycles to carbon border adjustments, from grid shortages to digital capacity gaps.

ADIPEC 2025 did not set out to answer aluminium’s questions. But the answers were there, in the subtext of every ministerial briefing and investment announcement: the energy equation that has insulated some aluminium regions and penalised others is about to get rewritten.

Energy supply tightening: Smelters will not be insulated from upstream shocks

One of the strongest signals came from upstream producers. The call for accelerated upstream energy investment was not rhetorical, but presented as a structural necessity. Several analysts point out that, without major capital inflows into both fossil fuels and clean energy infrastructure, the global energy system would enter a period of imbalance late in the decade.

As aluminium smelting consumed over 900 TWh in 2023, with 2024 consumption edging higher as production increases, very few other large-scale industrial sectors are as sensitive to electricity price, volatility or carbon intensity.

The outlook from the energy event suggests three risks. Firstly, upstream fossil supply tightening could raise the marginal cost of gas-based power in regions like the GCC or Australia. Then, coal markets remain vulnerable to geopolitical and regulatory pressures, directly affecting China, India and Africa. And thirdly, renewable buildout is not keeping pace with heavy-industry demand, increasing the likelihood of grid curtailments or spot-price spikes in hydro-dependent regions.

This combination points to higher and more volatile energy costs for aluminium producers and a widening gap between producers with captive or diversifiable power and those fully exposed to grid conditions.

Hydro-advantaged producers face a different challenge: ageing assets

ADIPEC’s discussions on legacy infrastructure also carry implications for aluminium’s cleanest producers. Europe, Canada, South America and Oceania all rely heavily on hydroelectricity for smelting — a structural advantage over coal-based competitors.

But the hydro fleet in several regions is ageing. Many assets are 30-50 years old, with maintenance cycles coming due. Reports highlight the risk of underinvestment in long-lived clean-energy assets — a scenario with direct consequences for aluminium. Hydropower’s reliability is already exposed to seasonal variability, and the 2023-24 data showed hydro usage rising only modestly in Europe (from 108,357 GWh to 111,284 GWh) and South America (from 25,684 GWh to 26,320 GWh) despite production pressures.

If capital flows shift away from hydro refurbishment, clean-aluminium producers could lose stability just as demand for low-carbon metal accelerates. Panels on investment allocation made clear that funding will increasingly chase flexible, fast-build assets, not legacy systems.

This introduces a new strategic concern. Will clean aluminium maintain its long-term advantage if hydro infrastructure fails to modernise at the required pace?

Coal-dependent producers face rising exposure to carbon penalties

If clean-energy regions worry about underinvestment, coal-dependent regions face the opposite problem — too much stranded infrastructure.

China, producing over 42 million tonnes of aluminium in 2024, remains tethered to coal-fired power. ADIPEC’s sessions on energy-transition trade mechanisms emphasised a trend that aluminium cannot ignore — carbon pricing and carbon-adjusted trade flows will accelerate.

Aluminium is already one of the materials under scrutiny for carbon border adjustments (CBAM in Europe being the clearest example). Experts pointed to expanding carbon-adjusted trade regimes globally, meaning exporters of high-carbon aluminium, especially those dependent on coal grids, could face tariff-equivalent carbon penalties, volume restrictions, or discounted pricing in downstream procurement.

The numbers make the problem plain. With China’s smelting system consuming 399,000 GWh of coal power per year, even a modest carbon-adjusted tariff would shift its entire cost structure. Africa, with roughly 11,100 GWh of coal-dependent smelting electricity, faces the same trajectory on a smaller scale. ADIPEC 2025 did not explicitly target aluminium, but the direction of travel is clear: high-carbon power will become a competitive liability.

Gas: The transitional backbone, but not a guarantee of stability

Gas-based power systems — central to the GCC’s aluminium strategy — also featured prominently. Speakers described gas as the “transition anchor,” particularly for regions aiming to replace coal while building renewable capacity.

But the analysis presented in Abu Dhabi carried a caveat about whether gas markets are entering a period of structural volatility. Factors cited include:

·         fluctuating shipping costs for LNG,

·         shifts in Asian demand,

·         geopolitical constraints on pipeline flows,

·         and uneven expansion of liquefaction infrastructure.

For aluminium regions reliant on gas, notably the GCC, where smelting output rose from 6.22 million tonnes to 6.31m tonnes, this means the transition narrative must include gas-to-renewables pathways, not gas alone.

Even modest price spikes in gas could alter aluminium cost curves, especially as renewables become more competitive. Investment panels highlighted that capital is increasingly favouring “firmed renewables” (solar/wind + storage) over large-scale new gas.

Specifically for the aluminium sector, this makes one conclusion unavoidable: gas will remain relevant through the 2030s, but its long-term role is uncertain.

Smelter investment cycles will need to match national energy policy cycles

Regions misaligned with their energy transitions will see smelter closures or relocations.

Events like ADIPEC did not offer a single roadmap for aluminium, but it delivered a consistent message: energy will increasingly define industrial competitiveness, and aluminium — as one of the world’s most power-intensive materials — sits squarely in the line of fire.

The 2023–24 smelting power data established the baseline: hydro regions are clean but ageing, gas-rich regions are stable but exposed, and coal-heavy regions are economically vulnerable in a carbon-priced world.

For aluminium, the question is no longer whether decarbonisation is necessary — the market has already decided that — but whether smelters will align themselves with the emerging energy reality fast enough to stay viable. The next decade will determine that outcome.

Source：AL Circle