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RPT-COLUMN-How would you like your aluminium? Green or black? Andy Home
May 11, 2017 / 1:00 AM / 7 months ago

RPT-COLUMN-How would you like your aluminium? Green or black? Andy Home

(Repeats with no changes. The opinions expressed here are those of the author, a columnist for Reuters)

By Andy Home

LONDON, May 10 (Reuters) - Aluminium is one of the materials benefiting from the greening of the world’s economy.

Lightweight and durable, it has been making steady inroads into the transportation sector in particular and enjoys one of the strongest usage profiles of any industrial metal.

But what promoters such as the Aluminum Association dub “the miracle metal” has a dirty little secret.

To produce the stuff requires a lot of electricity and in many parts of the world that electricity is generated by coal, every environmentalist’s bogey fossil fuel.

Aluminium’s split eco-personality, green in its applications, a lot darker in its production, has been exposed by China’s inclusion of the metal in the list of industries targeted for smog-busting production cuts during the winter heating months.

The resulting supply uncertainty has elevated aluminium to the best performer among the major industrial metals traded on the London Metal Exchange this year.

But that might be just the start of the price implications.

Some of the world’s largest producers of aluminium are now starting to push environmental sustainability as a market differentiator.

Consumers may soon have a choice of buying green, low-carbon aluminium or “black” metal with a higher carbon footprint, raising the prospect of a two-tier market structure.

THE LOW CARBON CLUB

Norwegian producer Norsk Hydro aims to be carbon neutral from a life-cycle perspective by 2020, the company’s head of strategy and analysis, Kathrine Fog, told CRU’s World Aluminium Conference in London last week.

There are plenty of levers to be pulled in achieving that aim, ranging from the production process to recycling, but the clue to Hydro’s real green advantage is in the company’s name.

Its smelters use hydro-electric power to make aluminium, which translates into carbon emissions at one fifth the scale of those generated by coal-derived power, according to the company’s website.

So too do those of Russian giant Rusal. It has closed older inefficient plants and upgraded others to slash direct emissions, its head of research Denis Nushtaev said at the same conference.

Rusal is aiming to achieve a target of seven tonnes of carbon dioxide to a tonne of aluminium by 2025, including both power and alumina inputs.

Not to be outdone, Rio Tinto’s vice president for aluminium sales and marketing, Tolga Egrilmezer, said his company is aiming for a four-to-one tonne CO2-aluminium ratio.

All three companies are backers of the new Aluminium Stewardship Initiative (ASI), which is in the process of creating sustainability benchmarks for the aluminium supply chain from bauxite mining to recycling.

And all three see “sustainability” as “a market driver”, to quote Rio, as major users include carbon footprint and environmental performance in their buying criteria.

The ASI’s membership includes automotive heavyweights such as BMW, Audi and Jaguar Land Rover and consumer groups such as Coca-Cola, Nespresso and Apple.

THE BAD CARBON CLUB

All aluminium smelters generate a combination of air and solid waste pollutants but it is the power source that is the real arbiter of the carbon profile.

Which is a problem for China, now the world’s largest single aluminium producer and one which relies heavily on coal as a core energy input.

CRU’s Rebecca Zhou told the conference that a massive 88 percent of all the country’s production was powered by coal last year.

Which is why, of course, Beijing policymakers have made aluminium a key target for curtailments in the region around the city over the next winter heating season, which runs from November to March.

Smelters and alumina refineries will all be forced to curtail output by at least 30 percent and plants producing the carbon anode used in the smelting process by 50 percent.

The market is still trying to calculate the implications of those looming cuts as well as the impact of a national audit of smelters to ensure they have not built “illegal” capacity.

The two-pronged clampdown comes in part response to rising political heat on China’s exports of aluminium to the rest of the world.

And it’s not hard to view the ASI as a soft complement to the harsher arsenal of potential trade measures being lined up against China.

Because if parts of the supply chain are going to want green over black aluminium, it’s Chinese material more than any other that’s going to be disadvantaged.

CHANGING THE SUPPLY CHAIN

As aluminium producers chase the holy grail of carbon neutrality, the industry is evolving in lots of unexpected ways.

New players such as Liberty Group are snapping up previously unwanted assets such as the small 50,000 tonne per year Lochaber smelter in Scotland.

Powered by hydro, it will be repurposed to produce aluminium wheels rather than metal, part of Liberty’s self-proclaimed vision of regrowing the UK’s “industrial base, powered by renewable energy and built with green metal”.

But perhaps one of the most potentially far-reaching innovations is being pilot-tested at one of German producer Trimet’s smelters.

“EnPot” technology allows a smelter to modulate its power use by up to 25 percent at the flick of a switch, according to Geoff Matthews of Energia Potior, which makes the kit.

That not only opens up the potential for smelters to help manage electric grid flows, changing usage according to price and availability, but breaks one of the industry’s great technical constraints.

Smelters have previously been designed to run most efficiently at 100 percent capacity all the time, which is one of the reasons the industry has such a poor record of reducing output in times of oversupply.

And if such potential ground-breaking technology all sounds a bit pie-in-the-sky, “EnPot” technology is already being test-run in three smelters with the first full potline expected to be converted by the end of this year, according to Matthews.

Whoever installs it is likely to be at the front of the queue for an ASI sustainability tick-mark just as soon as it starts rolling out its accreditation system, probably next year.

So too will the likes of Hydro, Rusal and Rio Tinto.

At which stage you’ll be hearing a lot more about green and black aluminium.

Editing by David Evans

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