Up to half of European aluminum capacity has been cut over the past two years as soaring electricity prices cut into the profits of all but the lowest-cost producers. But the cuts are still continuing even as electricity prices have come back down. Prices have not recovered from the steep fall that began a year ago, despite all the capacity being taken offline.

Due to high electricity prices since the end of 2021, European smelters have cut their annual aluminum capacity by more than 1 million tons. Average monthly wholesale electricity prices peaked in August last year, in some cases 10 times higher than two years ago.

Even with the fall in electricity prices, producers' margins are still insufficient. Electricity prices in Europe are still three times higher than they were two years ago. Aluminum prices have not recovered enough to save producers' profit margins, or even at all.

The latest cuts in European aluminum production may have less to do with electricity prices than with a structural shift in primary production eastwards.