Africa's Second-Largest Aluminum Smelter at Risk of Shutdown: Assessing the Cascading Economic and Investment Risks in the Metals Sector

The Mozal Aluminum Smelter, Africa's second-largest aluminum production facility, is teetering on the brink of a shutdown. Owned by a joint venture including South32 (47.1%), Mitsubishi (25%), and the Mozambique government (3.9%), the smelter has been a cornerstone of Mozambique's industrial economy, employing thousands and contributing significantly to export revenue. However, South32's recent announcement to place the facility under care and maintenance after March 2026—due to an inability to secure affordable electricity—has exposed the fragility of energy-intensive industries in regions with unstable infrastructure. This case study underscores a broader crisis: Africa's metals sector is increasingly vulnerable to cascading economic and investment risks driven by energy insecurity and shifting global demand dynamics.

The Immediate Risk: Mozal's Energy Dilemma

Mozal's operational challenges stem from its reliance on Hidroeléctrica de Cahora Bassa (HCB), a hydropower provider whose contract expires in 2026. South32 has spent months negotiating with HCB and the Mozambique government but has found no viable long-term power solution. The company has already recorded a $372 million impairment charge for 2025 and slashed its 2026 production forecast to 240 kilotons—a 32.4% drop from 2025 output. This decline is not just a corporate loss; it represents a blow to Mozambique's economy, where the smelter is the largest industrial employer and a critical foreign exchange earner.

The root issue is Africa's systemic energy poverty. Over 600 million people on the continent lack reliable electricity, and energy infrastructure financing gaps exceed $400 billion annually. For energy-intensive industries like aluminum smelting, which requires 13-15 kWh per ton of output, this is existential. Mozal's plight mirrors challenges faced by other African metals projects, from lithium mines in Zimbabwe to copper operations in the DRC, all of which depend on stable energy inputs.

Broader Systemic Risks in Africa's Metals Sector

Mozal's crisis is a microcosm of deeper trends in Africa's metals sector:

1. Energy Insecurity as a Growth Constraint
   The global pivot from climate-focused energy transitions to energy security agendas has created a paradox for African countries. While Western financiers are easing restrictions on fossil fuel projects, they remain cautious about funding large-scale mining operations due to environmental and governance concerns. Meanwhile, African governments face pressure to industrialize but lack the infrastructure to support energy-intensive industries. This tension is evident in Mozambique, where the government's push for gas-based industrialization clashes with international climate advocacy.

2. Global Demand Shifts and Geopolitical Tensions
   The surge in demand for critical minerals—lithium, cobalt, copper—has intensified competition for Africa's resources. China, the U.S., and the EU are all vying for access to these materials, but their strategies differ. China's dominance in processing and refining creates bottlenecks, while Western nations prioritize diversification, often at the expense of African producers. For Mozal, this means navigating a volatile market where raw material prices and export routes are increasingly politicized.

3. Financing Gaps and Policy Fragmentation
   African countries lack integrated energy and industrial policies, treating energy, climate, and development as siloed domains. This fragmentation hampers long-term planning. For example, while the African Development Bank's Desert to Power initiative aims to electrify 250 million people via solar, such projects take years to materialize. Mozal's immediate need for reliable power cannot wait for these initiatives to bear fruit.

Investment Implications: Navigating the Risks

For investors, the Mozal case highlights three key considerations:

1. Energy Infrastructure as a Strategic Asset
   Energy security is now a non-negotiable factor in metals investments. Projects in regions with unstable grids or unreliable power contracts face elevated risks. Investors should prioritize companies with diversified energy portfolios—such as those integrating solar, hydro, or gas—into their operations. Mozal's inability to secure a power deal underscores the need for energy resilience in capital-intensive industries.

2. Geopolitical Exposure and Supply Chain Diversification
   The global race for critical minerals is reshaping investment flows. While China remains a dominant player, U.S. and EU policies are shifting toward “friend-shoring” and regional partnerships. Investors should monitor how these dynamics affect African projects. For instance, the U.S. DFC's reauthorization with a broader mandate could unlock new financing for African mineral projects, but only if they align with energy security goals.

3. ESG and Community Engagement
   Mozal's potential shutdown also raises questions about corporate social responsibility. The smelter's 3,000+ employees and its role in Mozambique's economy mean that operational disruptions could trigger social unrest. Investors must assess how companies manage community relations and environmental impacts. Mozal's phased reduction in operations—aimed at preserving the asset for future restarts—demonstrates a cautious approach, but long-term success will depend on rebuilding trust with stakeholders.

The Path Forward: A Call for Integrated Strategies

Africa's metals sector cannot thrive in isolation. The Mozal crisis illustrates the need for integrated energy and industrial policies that align with global demand trends. Governments must prioritize infrastructure development while engaging with international partners to secure financing and technology. For investors, the lesson is clear: energy security and geopolitical agility are now as critical as mineral reserves.

In the short term, Mozal's transition to care and maintenance is a cautionary tale. In the long term, it is a call to action for African nations and their partners to build resilient energy systems that can support the continent's industrial ambitions. For investors, the metals sector remains a high-risk, high-reward arena—but only for those who can navigate the cascading challenges of energy insecurity and global demand shifts with foresight and flexibility.

Investment Advice:
- Diversify energy portfolios: Favor metals companies with hybrid energy solutions (e.g., solar + gas) to mitigate grid instability.
- Monitor geopolitical shifts: Track U.S. and EU policies on critical minerals and their implications for African supply chains.
- Prioritize ESG alignment: Invest in projects with transparent community engagement and environmental safeguards to avoid reputational and operational risks.

The future of Africa's metals sector hinges on its ability to reconcile energy poverty with industrial growth. Mozal's fate is a stark reminder that without systemic change, even the continent's largest industrial assets remain at risk.