Aluminium lobby says EU power costs are gutting industry as analysts warn of 10% summer spike

Aluminium lobby says EU power costs are gutting industry as analysts warn of 10% summer spike Europe's smelters are buckling under wholesale power costs that analysts say could climb another 10% over the summer on heat and Hormuz risk. Europe's aluminium producers told Montel on 21 May (2026-05-21) that high wholesale power prices are killing the bloc's heavy industry, a complaint landing just as analysts warned the cost of electricity could rise another 10% from current levels over the summer.² That matters because power, not labour or alumina, is now the swing cost for European smelters, and the analysts polled by Montel see hot, dry conditions through the summer pushing prices higher rather than offering relief. The same survey flagged the risk that the Strait of Hormuz stays closed, disrupting energy imports into the region and adding a second leg to the price pressure.² The mechanism is gas. Montel's industry experts said gas would remain the dominant marginal fuel setting European power prices, leaving the market exposed to both supply uncertainty and a summer heatwave amplified by El Nino.¹ When gas sets the clearing price, every spike in the hub feeds straight through to the electricity bills that smelters cannot hedge away.¹ The numbers behind the lobby's anger are stark. Gas-fired plants set the power price in 89% of hours so far in 2026, according to Ember, a think-tank, against just 15% in Spain.³ That gap shows up in the bills. Italy's average power price in March ran at €142 per MWh, while Spain managed €59, a spread wide enough to decide where energy-intensive production survives.³ For an aluminium smelter, that difference is existential. A plant facing the higher gas-set price pays far more for the single largest input in the process than a rival sitting in a less gas-dependent market. Capacity does not move quickly, but it does close, and the lobby's framing of power prices as an industrial killer reflects margins that have already gone negative for some operators.³ Not every signal points up. Earlier in the spring the market was running through what Montel EnAppSys called a season of sub-zero prices, with negative wholesale prints common two months into the negative-price season.⁵ Midday solar floods the grid and prices collapse, but those hours do little for a smelter that needs continuous baseload power and pays the gas-set evening price once the sun goes down.⁵ Policy offers no quick fix. The power lobby Eurelectric warned ahead of the European Commission's energy crisis plan that national measures to cap or subsidise gas prices distort markets and deliver minimal benefit to consumers.⁶ The Commission has floated a ceiling of €275 per MWh on the benchmark European gas futures contract, conditional on global LNG prices, but the proposal has split member states.⁴ The wider argument over Europe's marginal-pricing system is unlikely to be settled by this summer's auctions. The Economist notes the debate over the market-based system is unlikely to produce major reform, and that energy economists mostly think it should not.³ Fixed costs such as grid and network charges already make up around 20% of household bills, and one study suggests smarter design could save about 500GW of costly backup capacity for low-renewable hours.³ None of that lowers a smelter's bill this quarter. So the aluminium lobby is left protesting a price it cannot control, set by a gas market it does not buy in, in a season analysts expect to get worse. The trade to watch is whether the 10% summer rise materialises, and whether Hormuz stays shut.² If both land together, the question stops being which smelters cut output and becomes how many can justify staying open at all.²