European aluminum importers are rushing to secure supplies following a major outage at Iceland’s Grundartangi smelter and ahead of the EU’s new carbon tax, pushing premiums to a nine-month high.
The 320,000-ton-per-year smelter, owned by Century Aluminum, cut production by two-thirds in late October due to electrical equipment failure. Replacement transformers are expected to take 11–12 months to arrive, though partial production may resume sooner if repairs are possible. Iceland is the EU’s second-largest aluminum supplier, shipping over 241,000 tons in the first eight months of 2025, behind Mozambique.
Meanwhile, the EU’s Carbon Border Adjustment Mechanism (CBAM), effective January 1, 2026, is prompting importers to front-load shipments to avoid future costs and administrative hurdles. CBAM charges will vary depending on the emissions intensity of the smelter producing the aluminum, applying to imports of iron, steel, cement, electricity, hydrogen, and fertilizers as well.
Some Middle Eastern and Canadian producers face minimal CBAM costs due to low emissions, while older, less efficient smelters may struggle to access the EU market.
The combination of supply disruptions in Iceland and carbon-related cost pressures has sent duty-paid premiums on the London Metal Exchange to $324 per ton, briefly peaking at $330 earlier this month—the highest since January. Traders are closely watching both production recoveries and CBAM implementation as Europe’s aluminum market navigates these dual challenges.
