Aluminerie Alouette’s Power Move: Aluminum supply chain under Hydro-Québec

The company is jointly owned by five entities – AMAG Austria Metall AG (20%), Hydro Aluminum (20%), Marubeni Metals and Minerals (13.33%), QUALIUM (6.67%), and lastly Rio Tinto (40%), which announced a more than $1.2 billion investment less than two month ago to retrofit its own hydroelectric plant in the Saguenay–Lac-Saint-Jean region of Québec.

Hydro-Québec, a state-owned utility company, operates 61 hydroelectric generating stations across Canada.

Regional power play in near Canada’s maritimes

Alouette is headquartered farther north than most of the region’s smelters in the town of Sept-Îles and enjoys easier access to the Atlantic Ocean via the St. Lawrence River. The Hydro-Québec’s plant that feeds the Alouette smelter is further inland by about 65 miles in Sainte Marguerite and draws its power from the reservoir of the same name.

That said, Alouette is one of the more expensive power contracts in the Canadian landscape, relative compared to its peers. CRU estimates the facility’s 2024 electricity costs averaged close to $599 per metric ton (mt) of aluminum produced, ranking it as the second most expensive in North America after Alcoa and Rio Tinto’s Bécancour smelter, also supplied by Hydro-Québec.

Part of the reason it trends toward the upper end of power costs is that Rio Tinto’s Alcan power-generating facilities, assets included in Rio Tinto’s acquisition of Alcan in the late-2000’s, provide a handful of smelters with unusually low-cost electricity.

Compared to smelters that purchase 100% of their plant’s power from Hydro-Québec, as opposed to self-generating or a blended power supply agreement, they average between $500-$625/mt.

Alouette on the U.S. cost curve

Rio Tinto’s cheap, self-generated electricity assets and the concentration of smelters in the Quebec province obscures clear comparisons to market-based electricity costs for other smelters in North America, but bringing U.S. smelters into the mix arguably complicates the picture.

For context, the Alcoa Massena West plant in upstate New York uses hydroelectricity purchased from the New York Power Authority (NYPA), but the site’s power costs averaged around $389/mt in 2024, according to CRU data. Ironically, the NYPA’s generation stations use the same St. Lawrence corridor to feed their hydroelectric sites, farther down river from Alouette’s plants.

The idled Magnitude 7 Metals smelter in Missouri, which relied on wholesale market pricing, shut down with power costs averaging $674/mt last year. Meanwhile, costs for the shuttered Century Aluminum smelter Hawesville, Kentucky surpassed $1,000/mt before doors closed in 2022.

From 2029 to 2045

The description of the updated contract uses language that implies rates are more responsive to aluminum pricing conditions.

The new formula “will allow for increased returns to Hydro-Québec when aluminum market conditions are strong, without increasing financial exposure [for Alouette] during more difficult periods.” One interpretation is that Hydro-Québec’s return is capped, earning a comparatively fixed rate to the new agreement, and downside protections similar to the contract for Alouette will continue or be codified.

The current Alouette power agreement is linked to the price of aluminum. It allocates 965 megawatts (MW) annually, as well as specified wattage past the 965 MW mark at a specialized rate for industrial consumers.

Taken the two allocations together, the 965MW and the excess capacity allotments would allow for a capacity of 638,043 mt of power usage per year, assuming no maintenance downtime and 2024 estimates of the facilities power/production usage. That total aligns with the “over 630,000mt per year” production capacity noted by the company, and solidifies it as the largest smelter capacity in both the U.S. and Canada.

Sourcing power from a narrow pool

Hydro-Québec is the largest electricity provider in Canada and overwhelmingly so in the Sept-Îles/Côte-Nord region.

The specific power-generating station serving Alouette is the Sainte Marguerite-3 facility, which has an installed capacity of 882 MW across two units.

Rio Tinto supplies the region with hydroelectric power as well, the bulk of which supports the company’s iron ore operations in another of Rio’s jointly owned operations – the Iron Ore Company of Canada.

Lastly, there’s a Innergex/Desjardins’ joint venture with around 31 MW of installed capacity, or 3.5% of Hydro-Québec’s generation capacity in the region. Additionally, the hydroelectric portion of Innergex’s power portfolio is supplied by a river that runs downstream from the reservoir that state-owned Hydro-Québec holds the property rights to and uses for their own generation station.

In other words, Alouette has limited options in power sourcing. With few alternative suppliers in the region, its investment in Hydro-Québec’s infrastructure is just as much a strategy of remaining cost competitive as it is a cost-sharing mechanism, especially with both company’s decarbonization goals.

Green directives and decarb

Aluminerie Alouette is an Aluminum Stewardship Initiative (ASI) certified smelter and plans to achieve carbon neutrality by 2050. Tangentially, Hydro-Quebec’s intends to install an additional 11,000 MW of clean energy capacity over the next decade through a $200 billion investment.

Though the Alouette’s press release didn’t specify how the $1.5 billion will be apportioned, Hydro-Québec has made proposals for the region’s grid earlier in the year. Earlier this year, Hydro-Québec announced plans to add 440 megawatts (MW) of capacity by constructing an additional generating unit to the two already under operation. The initial proposal for the installation is expected to be commissioned in Q4 2031.

Securing stability in a shifting landscape

The Sainte Marguerite-3 station isn’t nearly as old as some of the other plants that are still used in aluminum smelting to this day. So, it stands to reason that a larger share of the financial commitments to upgrading the facility will go beyond simply bringing property, plant, and equipment up to speed.

As energy pricing and green initiatives become the make-or-break factor in smelter viability, Alouette’s access to reliable, low-emission electricity is crucial as external pressures remain unresolved.

Canada’s primary aluminum exports to the U.S. are still subject to 50% tariff rates, and the U.S. on reliance over the next 20 years could shift with two proposed, greenfield smelters: Emirates Global Aluminum’s Oklahoma smelter and Century Aluminum’s smelter tentatively planned for the mid-South.

Editor’s Note

_{If you’re interested in how electricity agreements are shaping the future of Canadian smelting, this piece accompanies our recent story on Rio Tinto’s investment to retrofit its hydroelectric plant in the Saguenay-Lac-Saint-Jean region. Both investments highlight the growing importance of long-term energy pricing strategies and emissions targets in North America.}