Can Iceland help the U.S. clean up its aluminum industry?

Aluminum is omnipresent in our modern world, but its production comes with a heavy carbon footprint. With Trump’s tariffs driving up prices, we’re reminded that it shouldn’t be wasted—and Iceland may hold the key to its circularity.

DTE, a Reykjavik-based startup rooted in the tiny island’s world-class aluminum industry, has partnered with American aluminum heavyweight Novelis to help it dramatically increase its use of recycling content to 75%.

That’s an ambitious goal, even though aluminum is—on paper—infinitely recyclable. “In principle, it is true, but it is more complicated than that,” DTE CTO Kristjan Leosson told Fortune. 

That’s because aluminum comes in many forms, from airplane wings to building frames. “If you have used beverage cans and you melt them, you don’t make used beverage cans out of that alloy,” Leosson said. “You have to manage all these streams of different recycled aluminum in such a way that you make the highest value end product again.”

The tech behind smarter smelting

That’s where DTE’s proprietary technology can help. With advanced sensors providing real-time data, the young company gives its clients the ability to analyze the composition of aluminum as it is melted down, which makes it easier to incorporate scraps without compromising quality. 

This level of precision is especially important as manufacturers work to meet rising demand for high-strength aluminum alloys to be used in sectors like aerospace, defense, renewable energy infrastructure, and semiconductors.

DTE

Karl Ágúst Matthíasson, DTE’s co-founder and newly appointed Chief Strategy Officer, offers a helpful analogy to explain this challenge. Speaking to Fortune, he compared aluminum scraps to leftovers: If you taste them actively enough, you could reuse yesterday’s premium lobster soup as stock for the premium soup of the day.

Stretching the analogy further, just as restaurants strive to source ingredients locally, reusing aluminum scrap means relying on a resource that doesn’t have to be imported. It is an argument that carries new urgency in the U.S., as the need to secure access to critical materials—especially those vital to sectors like defense—add up to supply chain pressures.

A geopolitical tailwind

“In a way, the tariffs are an incentive for the recycling business in the West and everywhere to make recycled aluminum, so it indirectly promotes demand for our product,” said Jakob Asmundsson, a seasoned Icelandic executive who became DTE’s CEO earlier this year.

Just as restaurants strive to source ingredients locally, reusing aluminum scrap means relying on a resource that doesn’t have to be imported.

But these tailwinds aren’t just a product of the current moment, as evidenced by DTE’s relationship with Novelis prior to the new Trump presidency. Aside from being DTE’s client, the aluminum industry player took part in the $16 million Series A2 round of financing raised by the startup in 2023.

In a short documentary produced by CBS News around that time, Novelis senior vice president Derek Prichett, cited quality as one key benefit of DTE, and safety as the other. By using DTE’s technology, Prichett said, Novelis “can keep operators away from our furnaces, away from liquid metal and out of harm’s way.”

Indeed, the most common alternative to DTE’s offering—manual sampling of molten metals for testing every now and then—is both wasteful and highly hazardous. It’s no surprise, then, that these dangerous, labor-intensive methods are expected to be steadily replaced by automation. 

“In a way, the tariffs are an incentive for the recycling business in the West and everywhere to make recycled aluminum, so it indirectly promotes demand for our product.’

Jakob Asmundsson, CEO, DTE

According to Matthíasson, automation will only be possible with the kind of real-time data that DTE provides to the aluminum industry. While old-fashioned for a long time, the sector has now woken up to the fact that it needs to be more sustainable—an urgent realization, given that it accounts for about 2% of both global electricity consumption and CO2 emissions. And that’s exactly where Iceland comes in.

Iceland’s low-carbon edge

The Icelandic electricity grid is entirely run on renewable energy from hydro and geothermal resources. Despite ongoing controversy over the environmental impacts, this has attracted aluminum smelters that are able to produce metal with significantly lower CO2 emissions than they would elsewhere. But Iceland’s contribution doesn’t stop there.

Just like DTE, other Icelandic startups have emerged out of the island’s aluminum industry. SnerpaPower, whose cofounder worked for Rio Tinto’s local aluminum smelter, develops smart management systems that help optimize energy use in power-intensive industries. Meanwhile, Arctus Aluminium is in the pilot phase of a process that would cut CO2 emissions altogether.

As the U.S. looks to reshore and decarbonize its aluminum supply chains, these Icelandic innovators could play a role by exporting their expertise—not aluminum itself, and potentially sidestep the tariffs brought in by the White House. 

While Iceland’s aluminum exports go almost entirely to Europe, making U.S. tariffs largely irrelevant, the real opportunity may lie in American players like Novelis tapping into Icelandic technology to hit their circularity goals, cutting both costs and emissions in the process.

“Improving the sustainability of the aluminum industry is a complex task, and is going to require a lot of different elements to solve the problem. And we feel that this technology is one of those elements that can help us get where we need to go,” Prichett said of DTE.

This story was originally featured on Fortune.com

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