The economics of electricity made Kitimat a good place to build an aluminum smelter, and U.S. tariffs might not do much to sway that equation.
B.C.’s sole aluminum smelter, located in the northwestern town of Kitimat, has landed square in the crosshairs of U.S. President Donald Trump’s tariff war, leaving its owner scrambling to adjust.
Rio Tinto’s B.C. Works aluminum smelter has the capacity to produce 420,000 tonnes per year of the light, versatile metal used in everything from beverage cans to aircraft parts. In 2024, it shipped 83 per cent of its production to the U.S.
When B.C.’s relatively small output is combined with Quebec’s massive industry, Canada exported some 2.7 million tonnes of primary aluminum to the U.S. in 2024, about 75 per cent of America’s aluminum imports.
Contrary to Trump’s declarations that, “We don’t need anything that they give,” and that Canada undercuts its own industry, American primary aluminum production amounted to just 678,000 tonnes, according to the U.S. Department of Commerce.
“The economics all comes down to the cost of electricity,” said University of B.C. economist John Steen. “Because of our hydroelectric power, we’ve got not only cheap electricity, but also electricity with a very low carbon footprint.”
In trade terms, undercutting commodity prices in another country to make yours more attractive is often referred to as dumping, and Steen said in the case of aluminum, “Canada just has a low cost of production.”
This is why Trump’s desire to ramp up aluminum production in the U.S. may be easier said than done.
Here are four things to know about North America’s aluminum production:
Why do aluminum producers build smelters where they build them?
The smelting process for aluminum involves using high-voltage, direct-current electricity to separate metal from alumina ore, so another way of thinking about aluminum is “it is solid electricity,” Steen said.
Aluminum producers are willing to ship the raw materials halfway around the globe where electricity is cheap. So bauxite might be mined in one place, such as Australia, then shipped somewhere else to refine it into alumina ore, and then shipped again to a smelter like the one in Kitimat to make the final product.
In other cases, Steen, who is director of the Bradshaw Research Initiative in Minerals and Mining at UBC, said China has plenty of low-cost, coal-fired electricity to make aluminum, albeit with a substantial carbon footprint. In Iceland, aluminum producers have access to geothermal power. In Canada, it’s hydroelectricity.
How did an aluminum smelter wind up in Kitimat?
The history of Kitimat’s aluminum smelter dates back to B.C.’s post-war industrial boom when the provincial government worked out a deal with what was then known as the Aluminum Company of Canada (Alcan), to provide the company with the cheap power it needed for a facility.
The location on B.C.’s remote North Coast was identified as having hydroelectric potential by surveyors as early as the 1920s.
The ensuing $500-million mega project (almost $6 billion in today’s dollars) involved building the Kenney Dam to block the Nechako River south of Vanderhoof, creation of the Nechako Reservoir, and blasting a 16-km tunnel through Mount Dubose to what is now an 896-megawatt powerhouse at Kemano that Rio Tinto, successor to Alcan after buying the firm in 2007, still owns.
An 80-km transmission line connects Kemano to the smelter in Kitimat, the first part of which opened in 1954 and was developed into the facility that still employs 1,500 people and, by an estimate in 2023, injects $500 million annually into the B.C. economy.
Rio Tinto also owns five aluminum smelters in Quebec that tap that province’s ample hydro power. “So there’s these legacy deals that put Rio Tinto into a really, really competitive position,” Steen said.
What is the likelihood aluminum producers will move to the U.S.?
Trump’s stated goal with tariffs is to coerce industrial companies — auto manufacturers, steel mills, aluminum smelters — to relocate stateside to create American jobs, declaring that if they make their products in the U.S., “there are no tariffs.”
For aluminum producers, however, Steen said that will be a harder sell. He noted that the 10 per cent tariffs Trump briefly imposed on Canadian aluminum in 2018 “hardly had any impact on improving output from the U.S.”
Steen guesses sourcing electricity in the U.S. would be difficult because, “there’s been an under-investment in the U.S. power supply for quite a long time.”
Smelters are also still multi-billion-dollar, complicated mega projects that take years to build, Steen said.
“If they go wrong, they go over time and over budget by a long way,” Steen said.
Rio Tinto, in the 2010s, spent $6 billion rebuilding its Kitimat smelter using modernized, lower-carbon technology for smelting aluminum. The new facility reopened in 2016.
How will Rio Tinto adjust in Kitimat?
Rio Tinto officials declined to comment. Company executive Jerome Pécresse told Business In Vancouver magazine that in the short term, tariffs will be passed on to customers, but in the longer term, it will look to sell its product elsewhere.
Diana Gibson, B.C.’s minister of jobs and economic development, said the province saw the aluminum sector pivot some of its trade to destinations such as the Netherlands in the EU under tariffs during Trump’s last administration.
In 2019, for instance, B.C. trade figures show that 32 per cent of aluminum exports from the province went to the EU on total production valued at $758 million. In 2024, 16 per cent of exports valued at $1.3 billion went to the EU.
“These opportunities are going to be about our creativity and our relationships,” Gibson said.
Confused by the trade war? Our interactive tariff tracker, updated daily, will keep tabs on which tariffs are in effect, and which ones are coming up next.