Insight

The aluminium incentive price and the impact of carbon emissions and new technologies

14 April 2021

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14 April 2021

The aluminium incentive price and the impact of carbon emissions and new technologies

Report summary

We model generic smelters using a mix of greenfield and brownfield projects. We estimate, based on our Cost Service, their respective capital requirements and long run operating costs. In formulating our view, we use a financial-based model. Given a project’s capex and operating cost, the incentive price for that project is the price that generates a cashflow to provide a specific rate of return, which varies between 8% and 13% according to the location of the project. The average incentive price is the (production) weighted average of all the modelled projects.

The environment for aluminium smelters is changing rapidly
Which countries are likely to host new aluminium capacity?
Base case aluminium incentive price
Risks to our base case
- The price to pay for carbon emissions
- and the benefits of non-carbon electrolytic cells
Base case alumina incentive price
Which countries are likely to host new alumina capacity?
- India has enough bauxite resources and appetite for investment in the aluminium value chain.