Aluminum shortage threatens US clean energy plans

By Jason Plautz | 03/13/2024 06:58 AM EDT

The closure of a Missouri plant highlights a squeeze that could hamper solar, battery and electric vehicle projects.

worker in an aluminum factory

Worker in an aluminum factory. iStock

A scramble to save a shuttered southeast Missouri aluminum plant is putting a fresh spotlight on the troubled domestic supply chain of a so-called miracle metal crucial to the nation’s clean energy transition.

Until it curtailed production in January, the Magnitude 7 Metals plant had the capacity to produce as much as 30 percent of the country’s overall supply of aluminum — a metal used in everything from airplanes and cars to solar panels and electric transmission lines.

That marks the third closure of a U.S. aluminum plant in less than two years, leaving the country with just four. The trend is especially surprising given the passage of the Inflation Reduction Act, the landmark 2022 law designed to boost the clean energy transition and create a domestic supply chain for clean energy products.


As Missouri officials are on a blitz to restart the plant — including appealing to the Biden administration to take emergency action — it’s an open question of much it can do to revitalize the country’s flagging aluminum industry.

“The world is moving to electrification, so where the minerals and materials come from and how they’re processed is going to shape national security and the energy transition,” said Joe Quinn, vice president of strategic industrial materials for SAFE, the group formerly known as Securing America’s Future Energy that advocates for policies promoting domestic energy resources.

The Magnitude 7 plant closure reveals one of the major challenges facing the industry: electricity costs. Smelting — which takes refined bauxite ore and converts it into the lightweight metal that’s usable in commercial products — requires near-constant electricity at high volumes. It’s estimated that as much as 40 percent of the cost of aluminum is electricity itself.

The Missouri plant was the state’s single largest consumer of energy. Company executives told employees in a January letter reported by local station Heartland News that “abnormally cold weather” and unforeseen “business circumstances” were behind the decision to close in January, but local officials said that high energy costs no doubt contributed to the plant’s difficulty.

The U.S. was the top producer of aluminum through 2000. At its peak in 1980, the industry produced 5.1 million metric tons, according to the Congressional Research Service. But by 2021, that production was down to just 880,000 tons, compared to the 4.3 million metric tons the U.S. consumed that year.

Quinn said the impact of the current situation is clear.

“If we want electric vehicles, batteries, solar panels [and] wind turbines, we could find ourselves in a position where we have to rely on adversaries that have the materials and processes necessary to make the energy transition,” he said.

James Owen, executive director of the clean energy group Renew Missouri, said there were discussions going back to December 2022 about whether the Magnitude 7 plant could move away its coal-heavy electricity portfolio and save tens of millions of dollars a year with cheaper, cleaner electricity. Ultimately, those discussions did not advance before the hammer fell.

Another aluminum smelter — a Century Aluminum plant in Hawesville, Kentucky — shut down in June 2022 after saying power costs had tripled, making operations unsustainable.

It highlights the paradox at the heart of the market. Cranking out aluminum at home could drop the cost of crucial clean energy equipment. Developers of the Grain Belt Express transmission line, which will carry clean energy across four Midwestern states, have contracted with wire and cable manufacturer Prysmian, which had pledged to use “commercially reasonable efforts” to source materials from the Magnitude 7 plant.

Running smelters, which produce aluminum, is also an energy-intensive operation with a significant carbon footprint if they are running off of fossil fuel plants. A 2020 World Economic Forum report estimated that aluminum accounted for 2 percent of the world’s human-caused greenhouse gas emissions.

But without cheaper energy, it’s going to be harder to make that metal at home and get more clean energy on the grid.

“It might take five years to get the scale of electricity at the price that is required. But in five years we may not have any more primary aluminum facilities,” said Annie Sartor, aluminum campaign director for Industrious Labs, an advocacy group focused on decarbonizing heavy industry. “This industry needs energy at the right price to stop the bleeding.”

Pleas for help

The Magnitude 7 plant in New Madrid, Missouri, had already closed once before it was bought from bankruptcy and restarted after the Trump administration imposed duties on imported aluminum from China in 2018. But the plant had long struggled with costs. Magnitude 7 CEO Charles Reali told Reuters in 2020 that the plant was “seeing red numbers every month.”

That’s in part because the production relied on relatively high-cost coal from local utility Associated Electric Cooperative Inc. (AECI).

The months around the plant’s curtailment have seen a flurry of political and activist attention. State lawmakers passed an $8.5 million loan for the plant in the state budget last year, but it was vetoed by term-limited Missouri Republican Gov. Mike Parson amid questions about its constitutionality.

Another bill proposed this year by gubernatorial candidate and state Rep. Crystal Quade, a Democrat, would allow a third-party renewable generator to generate electricity and sell it directly to the aluminum smelter. That bill has not advanced.

Sen. Josh Hawley (R-Mo.) sent a letter in January to President Joe Biden asking the White House to invoke the Defense Production Act of 1950 to prevent the plant’s shutdown to “preserve good-paying union jobs and safeguard national security.”

That law gives the president the ability to require companies to take actions in the national interest and was invoked last year by Biden to address a nationwide baby formula shortage.

The White House and Department of Energy did not respond to a request for comment from E&E News about the Defense Production Act request or any other potential action related to the aluminum industry. Hawley’s office said there has not been a response from the administration.

Owen of Renew Missouri said that for the plant to be appealing to other buyers, executives should look at how to cobble together as many tax credits to reduce energy costs as possible, as well as building new renewable generation.

One area that could help, Owen said, is in the Inflation Reduction Act’s program supporting greenhouse gas reductions from electric cooperatives. If AECI receives any funding from the program, he said, that could allow the co-op to move away from coal power at a lower cost.

“Whoever comes in needs to be looking at a proactive solution,” Owen said. “This plant needs to be as attractive as possible. With clean energy, not only do you have the lower cost, but it becomes more appealing to corporate entities that have clean energy goals.”

AECI referred all questions about the plant’s electricity consumption to plant ownership. ARG International, the Swiss company that owns Magnitude 7, did not respond to a request for comment.

Other smelters, however, have shown success in sourcing cheaper energy. The Alcoa Massena plant in upstate New York, for example, has a hydroelectricity contract with the New York Power Authority. Century Aluminum’s Mount Holly plant in South Carolina has struck three-year power contracts with a local power provider to shield it from spikes in energy costs.

Delivery ‘gap’

The closure comes as the Biden administration emphasizes the U.S. supply chain through the Inflation Reduction Act, the 2021 bipartisan infrastructure law and 2022’s CHIPS and Science Act. The Inflation Reduction Act created new incentives for solar and wind deployment and added tax incentives for sourcing materials domestically.

When the Treasury Department in December 2023 announced proposed regulations implementing the Section 45X tax credit for domestically produced goods, Jesse Gary, the CEO of Century Aluminum, held an investor call touting the impact of the credits.

Since Treasury’s proposal applied the credit to aluminum production, the company could see a $60 million benefit in 2024 and up to $50 million more if the credit could apply to direct and indirect material costs.

The credits, Gary said, “will help to underpin further investment in our industry, strengthen domestic supply chains and ensure that the U.S. industry will be able to meet U.S. needs for this vital metal.”

In that same call, however, Gary noted that there were no immediate plans to reopen the company’s smelter in Hawesville.

The Treasury Department is still finalizing those tax credits.

The issue, SAFE’s Quinn said, is that for all of the “great programs” in the Inflation Reduction Act, policy action is not happening fast enough to change the economics for the industry. The result is that just two of the country’s smelters are running at full capacity and production continues to drop.

“There’s a lot of promise, things are moving in the right direction with a lot of alignment,” said Quinn. “But the challenge is the gap between intention and delivery.”

Correction: A previous version of this story misstated the Grain Belt Express transmission line’s association with Magnitude 7.