Alumina prices have fallen roughly 15% from their March 2026 peak, with Fastmarkets assessing alumina FOB Australia at approximately $420 per metric ton as of late June. The decline reflects new refining capacity coming online in Indonesia and India, as well as improved bauxite supply from Guinea after seasonal rains ended.
The alumina cost decline, combined with lower energy costs in Europe (power prices are roughly €55-65/MWh, down 10% year-over-year) and slightly lower EU carbon costs (€78/t CO₂, down 8% quarter-over-quarter), has dropped the marginal cost of aluminum production to an estimated $2,900-3,100 per metric ton. LME aluminum at $3,150/mt is now trading just above this cost floor.
This cost compression matters. In Q1 2026, when alumina was above $500/mt and energy costs were higher, the cost floor for aluminum was closer to $3,300-3,500/mt. That floor is now $300-400 lower, which partly explains why aluminum prices have fallen so far so fast -- the production cost support is literally moving down underneath the market.
Around 15-20% of global aluminum production sits in the top cost quartile, with estimated costs above $3,000/mt. If LME prices breach $3,000, these higher-cost smelters -- mostly in Europe and parts of China -- face negative margins. Curtailments are not imminent but the pressure is building. The last time LME aluminum traded below $3,000 for an extended period was in early 2024, when roughly 800,000 tonnes of European capacity was idled.
The falling cost floor changes the negotiation dynamic. Your aluminum suppliers are enjoying wider margins thanks to lower input costs — even as LME prices fall, their profitability may not be collapsing. Use this to push for lower premiums. If your supplier claims ‘cost pressure,’ ask them to show their alumina and power cost assumptions. The data doesn’t support a margin squeeze yet.