Aluminum prices soar, boosting Icelandic smelters

Global aluminum prices have experienced a dramatic increase, with the average market price in 2025 reaching approximately $3,500 per ton, a substantial rise from around $2,600 per ton the previous year. This surge is anticipated to bring significant benefits to Iceland's aluminum smelters and the companies supplying them with electricity, as their contracts are typically tied to the fluctuating price of aluminum.

Market forecasts vary, with some predicting a stabilization around $3,200 per ton for the year, while others suggest the price could climb as high as $4,000 per ton. If the more optimistic forecast materializes, Iceland's aluminum export revenues could see an increase of over 70 billion Icelandic krónur compared to the previous year. Should prices reach $4,000 per ton, this figure could rise to approximately 170 billion krónur.

Several factors contribute to the elevated aluminum prices. Reduced production in Europe, driven by escalating energy costs, is a major cause. Additionally, sanctions related to the Ukraine conflict and trade tariffs have had a considerable impact. The recent closure of the Strait of Hormuz, a critical shipping lane for nearly 10% of global aluminum production, has further exacerbated the situation, halting production in the Persian Gulf region.

While industry analysts acknowledge the short-term positive effects for Icelandic producers, they also caution about potential long-term negative consequences. A sustained high price could lead to a decrease in global demand for aluminum. Experts interviewed by Morgunblaðið suggest that restoring production in the affected Persian Gulf region could take up to 18 months after peace is established.