The Mozal closure removes approximately 300,000 tonnes per year of aluminum capacity that had been a key supplier to the European market. The smelter, operated by South32, was unable to secure a viable power supply agreement, making continued operation uneconomic at current electricity prices.
European premiums have responded sharply. Duty-paid premiums over LME cash surged from under $200/t in mid-2025 to over $340/t in early 2026. Canada, historically the largest aluminum supplier to the US market, started diverting shipments to Europe around May 2025, responding to higher European premiums.
The supply disruption comes alongside the implementation of the EU's Carbon Border Adjustment Mechanism (CBAM), which raises the effective cost of carbon-intensive aluminum imports. This supports LME prices and incentivizes green supply but adds regulatory complexity and potential cost volatility.
High European power costs remain a structural constraint for the region's smelters. Persistently elevated electricity and natural gas prices are significantly impacting operating rates and raising marginal production costs, reinforcing supply discipline across the European industry.
The US tariff landscape adds another variable. US tariff hikes of up to 50% on some aluminum flows helped drive the 20%+ price increase in 2025 and continue to shape trade flows and regional premia in 2026.
European buyers should secure term contracts for H2 2026 as regional supply tightness persists. The Mozal closure is structural, not cyclical. Consider diversifying into secondary (recycled) aluminum where specifications allow. Monitor European power prices as a leading indicator for smelter operating rates. CBAM compliance costs must be factored into landed cost models.