The New Metals Standard, Vol IV – Aluminium: Plugging In to Value

13/11/25

Proof of Work, in Metal

Lately the global search for independent stores of value has expanded beyond vaults to blockchains. Digital tokens for gold signal how physical wealth can be represented through programmable ownership. Long before tokenisation arrived on the finance scene, certain materials already embodied many similar traits - decentralised, verifiable, energy-backed: Aluminium is one.

Cryptocurrencies draw value from computation that confirms ownership – electricity is consumed to secure the ledger. The value of aluminium is electricity consumed to create ingots - a tangible record of power converted into production. As computation becomes the new frontier of scarcity, the question is not only by what means do we generate electricity, but how is it allocated. AI training clusters, crypto mines, and aluminium smelters all compete for the same electrons - transforming energy into a different forms of capital.

An Economic Standard

Discussions around prospects for the global economy inevitably touch upon inflation. Over time inflation is anchored by capacity, productivity, and the cost of energy.

Aluminium sits precisely at that intersection - as both a store of electricity and a fundamental input to growth.

Industrial Architecture

Historically, energy-rich regions sat far from demand centres, but that divide is narrowing. Cost structures also diverge along policy lines; some producers gain advantage by downplaying environmental constraints, while others accept higher costs in pursuit of strategic (longer term) resilience. Gulf states are coupling solar and nuclear projects with state-backed smelters. China is relocating smelters to hydropower provinces while simultaneously reducing export incentives and capping primary production. Europe and the U.S., by contrast, face accelerating closures and growing import reliance. These structural realities were hidden beneath the noise of global integration; however, Washington’s use of tariffs and subsidies to defend and bolster capacity has broken the once discreet geopolitical race out into the open.

As the line between inventory and strategy blurs, market characteristics are adapting accordingly; new participants are entering the physical trading space with long term strategic intentions. Aluminium inventory is now being held for optionality as well as for trade. When traders choose to store rather than sell, they are not speculating on short-term price or responding to nuances of curve structure but preserving access to embedded energy in a volatile world. Holding aluminium carries real costs in storage, insurance, and financing, yet the persistence of off-warrant stock suggests those costs are tolerated and accepted.

Circular Power – Secondary Aluminium

When primary production becomes constrained, the investment case for secondary grows stronger. Recycling requires only about 0.7 MWh of electricity per ton - roughly five percent of the energy needed for primary, giving structural advantage in any environment of rising power prices or carbon intensity. Over time, the market tends toward equilibrium between  smelting and recycled supply. Aluminium’s recyclability thus transforms it from a one-time energy store into a perpetual circuit. Companies that close that loop - converting scrap into new metal at a fraction of the primary energy cost, are an important consideration for a broad aluminium investment portfolio.

Battery Metals – Limiting Factors

Other metals can also be seen as stores of power, yet each carries the constraint of its specific technology implementation - limiting its role as a scalable reserve. Lithium, nickel and cobalt possess far higher energy density by mass, but they are inseparable from the technologies that consume them. Their value is tied less to stored energy itself than to the pace of innovation in batteries, vehicles, and electronics.

Lithium is the most reactive example, capable of extraordinary energy storage per unit weight, yet prone to instability, making it unsafe to store in bulk or handle outside controlled environments. Large-scale production remains expensive, supply chains are regionally concentrated, and substitution pressures are constant as new chemistries emerge. Nickel and cobalt face similar technology evolution challenges - both are critical to cathode technologies today, but shifts toward sodium-ion and solid-state systems could erode demand within a single innovation cycle.

By contrast, aluminium’s energy value is static and universal. It does not depend on a specific technology platform, nor does it degrade or become obsolete. Once produced, it holds its energy content indefinitely and can be re-melted or recast with minimal loss. In that sense, aluminium represents the most stable and scalable form of embodied electricity - a passive battery.

Current Market context

Aluminium prices are trading close to their highest levels in more than a year, with the LME three-month contract around $2,870 per tonne. The market has recovered markedly from its April low of $2,300, supported by tightening supply conditions and renewed physical demand. Momentum indicators remain firm, with the RSI in the low 60s, suggesting steady upward pressure rather than speculative excess.

In the United States, the all-in aluminium price has climbed to roughly $4,800 per tonne, reflecting record-high Midwest Premiums near 89 ¢/lb. The imposition and subsequent doubling of tariffs earlier in the year has constrained import flows from Canada and the Middle East, exposing the depth of U.S. dependence on foreign supply. Analysts estimate that monthly imports between April and July were around 60,000 tonnes lower than in 2024, only partly offset by additional scrap inflows. The result has been a steady drawdown in inventories and a tightening domestic market.

Exchange data confirm the physical constraint. Global LME aluminium stocks stand near 545,000 tonnes, concentrated almost entirely in Asia, mainly Malaysia and South Korea, while the Americas show no registered inventory and Europe holds minimal tonnage. The regional imbalance underscores the divergence between production hubs and consumption centres that has defined this phase of the cycle.

Illustrative Construct: Example Allocation within the Aluminium Sleeve

Within the aluminium investment universe, exposures can be structured across three layers. Core holdings lie with integrated producers such as Alcoa, Norsk Hydro, and Century Aluminum, whose margins are most sensitive to energy and smelting economics. Strategic positions in recycling and downstream firms such as Constellium and Kaiser capture the efficiency yield of aluminium’s circularity. Futures on the London Metal Exchange offer the most direct way to express a global view on price or inflation. CME contracts, including the North American Aluminium and Midwest Premium (Platts) futures, serve as valuable optional tools for targeting regional distortions and policy-driven price differentials. Together, they form a coherent architecture through which aluminium can be treated not only as a commodity but as a diversified financial system linked to energy, policy, and industrial capacity.

Aluminium Equities

Alcoa (AA:US) – A leading U.S.-based, vertically integrated aluminium producer engaged in bauxite mining, alumina refining, and aluminium smelting, with growing exposure to low-carbon initiatives. The company remains central to the energy and industrial policy agenda in the United States, benefitting from tariffs, domestic supply protection, and rising demand for low-emission metal. Alcoa’s strategic push into sustainable smelting technologies such as ELYSIS - a zero-carbon electrolysis process developed with Rio Tinto - positions it at the forefront of next-generation primary production. Its balance between upstream and refining operations provides leverage to both alumina pricing and power costs.

Norsk Hydro ASA (NHYDY:US) – A Norway-headquartered aluminium and renewable-energy company operating across the full aluminium value chain, from hydropower generation to rolled and extruded products. Hydro continues to expand its “green aluminium” portfolio through projects such as Hydro CIRCAL and Hydro REDUXA, which certify low-carbon primary and recycled aluminium with traceable emission data. With European smelting capacity supported by hydropower and an expanding footprint in recycling, Hydro represents one of the clearest corporate examples of aluminium as a circular-energy asset. Its ADRs provide U.S. investors direct exposure to both renewable energy generation and low-carbon aluminium production.

Century Aluminum (CENX:US) – A U.S. producer of primary aluminium operating smelters in the United States and Iceland, supplying metal to industrial, automotive, and construction markets. The company has faced a temporary setback at its Icelandic smelter, where one of two potlines is expected to remain offline for up to a year following transformer damage, though management has indicated efforts to accelerate repair or implement an interim fix. Despite this disruption, Century remains integral to the U.S. aluminium supply chain and a key beneficiary of policy efforts to secure domestic metal production. Glencore Plc, formerly its largest shareholder, recently reduced its position through a block trade that broadened Century’s shareholder base but briefly pressured the stock after a strong price rally earlier in the year.

Kaiser Aluminum (KALU:US) – A U.S. downstream manufacturer specialising in rolled, extruded, and drawn aluminium products serving aerospace, automotive, and industrial sectors. Kaiser’s focus on value-added fabrication provides relative insulation from raw-metal price volatility, with performance tied instead to manufacturing demand and margin spread. Recent investments in recycling and billet production align with the sector’s shift toward lower-carbon, circular supply chains. Its strong exposure to U.S. defence and aerospace programmes positions Kaiser within the strategic industrial layer of the aluminium ecosystem.

Constellium SE (CSTM:US) – A France-based, NYSE-listed producer of high-performance aluminium rolled and extruded products, with extensive recycling and closed-loop systems supplying the automotive, aerospace, and packaging industries. Constellium’s recycling capacity exceeds one million tonnes annually, and the company continues to expand its role in circular production, recovering high-grade scrap from automotive and packaging waste streams. Its North American operations have benefitted from re-shoring trends and tariff-driven domestic demand, while long-term contracts with major aerospace and beverage companies provide durable revenue visibility.

Derivative Products

LME Aluminium LAZ25 25 MT (1-25 MT available)

CME Aluminium  ALEF6 25 MT

CME MW Premium Platts 55,116 lb (25 MT)

The London Metal Exchange (LME) and CME Group both list physically deliverable aluminium futures representing 25 metric tons of 99.7 percent purity metal, though they serve distinct but complementary functions that, taken together, provide a broader market perspective. The LME Aluminium contract is the global benchmark, supported by deep liquidity, long-dated forward trading, and delivery through an international network of approved warehouses. Open interest and daily trading volumes on the LME are significantly larger, reflecting its role as the primary reference point for global aluminium pricing and financing. The CME Aluminium contract mirrors those same physical specifications but is centred on North American delivery points and closely linked to the U.S. Midwest Premium (MWP) — the regional surcharge added to the LME base price to reflect delivery, logistics, and tariff costs in the American market. Quoted in U.S. cents per pound, the MWP captures regional supply-demand conditions and the effect of trade policy on domestic availability. The CME also lists a dedicated MWP (Platts) futures contract that allows participants to hedge that differential directly. While the LME anchors global base pricing, the CME contracts provide an important, tradeable framework for North American producers, consumers, and investors seeking targeted exposure to regional aluminium dynamics.

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