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The return of the new year means the return of Commodity in Focus. As governments focus on growth and net zero, one of the main beneficiaries is expected to be aluminium.
When it comes to UK metal production and exporting, much of the focus has been on steel. However, aluminium remains one of the most important metals for the UK’s economic future, acting as a driver of growth and supporting many industries.
Growth metal
According to a report from the Aluminium Federation (ALFED), the industry supports 108,000 jobs and adds £9.4bn in gross value added to the UK economy.
Despite difficult economic conditions, Bridgnorth Aluminium - the UK’s last remaining producer of flat rolled aluminium coils - has recently returned to 24/7 production after a three-year absence, with the hope that this creates new jobs in the West Midlands.
AI, with its never-ending thirst for new data centres and associated infrastructure, is also another source of growth and new orders, as is the defence and aerospace sector.
The government estimates that more aluminium will be needed to satisfy the demand for some of the country’s most productive sectors in the future, with electric vehicles’, clean energy and ‘other advanced manufacturing’ the major users.
Despite difficult economic conditions, Bridgnorth has recently returned to 24/7 production after a three-year absence, with the hope that this creates new jobs in the West Midlands.
Government agenda
Many of the industries named above are regarded as vitally important to the future of the country by the Labour government.
It has released papers and strategies on areas like defence, advanced manufacturing and aerospace, while ministers have often talked of the importance of AI and the net zero agenda.
However, while much focus has been placed on steel, aluminium doesn’t receive as much attention. The former is due to receive its own strategy, whereas the latter doesn’t receive as much policy support.
Dedicated sectoral support
In recent months, this approach appears to be changing.
The recent critical minerals strategy included aluminium in its list of ‘critical and growth’ minerals, while other papers have discussed the importance of support for primary manufacturing, such as reducing industrial energy costs and boosting the UK’s recycling capability.
Current measures supporting the metal tend to be “cross-sectoral”, according to ALFED. The UK Emissions Trading Scheme, its Carbon Border Adjustment Mechanism (CBAM) and the British Industrial Supercharger are all examples of support that is available but not yet specifically tailored to the industry.
At the moment, the inclusion of aluminium as a ‘critical mineral’ in the strategy only means that support is being “explored” for the sector.
Additionally, there is only a combined pot of £50m worth of financial support on offer in the strategy, although more is reportedly coming from other sources like the National Wealth Fund.
ALFED’s CEO, Nadine Bloxsome, said “recognition is no longer enough".
“Policy must now move at the pace industry needs, otherwise the UK risks losing value-adding aluminium capabilities long before new measures take effect.”
Powering the industry
Electricity remains a major barrier to domestic production. UK factories pay significantly higher rates than most countries, especially when compared to their counterparts in the US and China.
Even compared to Europe, which has higher prices than the global average, British producers pay considerably more. Research by the Institute for Economic Affairs in 2024 found that the UK ranked the highest of 28 countries surveyed for industrial electricity prices, including other high-cost countries such as France, Norway and Portugal.
The government says that it is trying to reduce energy costs for British factories, with schemes announced last year that offer discounted rates and support for energy-intensive businesses, including those in the metals sector.
However, as Musgrave points out, these don’t start immediately and only put UK producers on the same level as their European counterparts.
“If you talk to industrial companies in the EU, they're really unhappy with their energy price levels on a global basis.
“This is putting us on par with Europe, but Europe is still high compared to the global picture.”
Tariffs and trade
Aluminium has also been hit by the tariff policy of US president Donald Trump, further complicating the global picture.
The stated aim of the US tariff regime is to bring back American manufacturing.
On 3 June 2025, the US imposed tariffs of 25% on UK exports of aluminium and steel into the US. Although the Department for Business and Trade (DBT) celebrated the fact that the UK had avoided the higher rate of 50%, this was still a blow to the industry.
JCB’s CEO Graeme MacDonald said that his company, one of the world’s leading manufacturers of construction equipment, would reconsider how it trades with North America, calling the measures “punitive.”
Despite Trump’s aims, Ewa Manthey, a commodities analyst at Dutch bank ING, wrote that the US is still likely to remain a net importer of the metal. Analysis by the bank also found that the majority of US aluminium imports come from Canada (58%), with the UK not even ranking in the top five countries.
The latest DBT factsheet on trade with the US showed that British non-ferrous metals exports – which includes aluminium – amounted to 5.5% of trade in the four quarters to the end of Q2 2025, totalling £3.5bn.
However, there is still the risk of supply chain disruption hitting UK companies harder. ALFED warned that once metals become less competitive in the global market, they tend to seek new markets elsewhere, raising the prospect of increased competition in the domestic market.
CBAM
Another of the big changes impacting the industry is the EU’s Carbon Border Adjustment Mechanism (CBAM).
A recent whitepaper launched by the Chartered Institute of Export & International Trade and ALFED included a dedicated section on CBAM, noting the extra complications it could bring to UK traders.
The ‘definitive phase’ of EU CBAM began on 1 January 2026. Under the previous ‘transition phase’ suppliers were only required to report their emissions, whereas they now face additional tariffs when exporting carbon-emitting goods to the EU.
Musgrave admits it’s been a challenge for his company, due to uncertainty during the early days of the policy. As late as December, “we [were] still trying to figure out… what the CBAM bill” would be for EU customers, he adds.
“Exporters will be tasked with providing embedded emissions figures for the products they produce, which will require additional paperwork and support,” explains Joe Goldsworthy, a customs consultant and CBAM expert at the Chartered Institute.
Goldsworthy added: “Failure to do so could lead to increased costs on goods entering the EU”.
“Exporters will first need to liaise with their customers in the EU, to see whether they exceed the threshold for imports of CBAM-scope goods, and who is responsible for reporting.”
The European Commission published information in December aimed to clarify certain parts of the policy, including additional details on the information suppliers need to provide to their customers.
However, the market-based nature of CBAM complicates contractual negotiations, particularly for multi-year contracts. The price of CBAM certificates will be updated quarterly in 2026, but weekly – on average – in 2027.
This is one of the first measures of its kind but other jurisdictions are considering it. Japan, Australia and Canada have previously considered implementing their own versions, while the UK’s CBAM is due to come into force early next year.
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