As the focus on environment is growing urging manufacturers for using sustainably sourced materials, aluminium industry is actually heading towards an exclusive premium market for clean and green aluminium. Though lightweighting and easy recyclability make aluminium a more thoughtful choice, its energy intensive production offsets its green credentials. Globally, aluminium production contributes 4% of emissions and the major part of aluminium is produced with coal powered energy.
A few aluminium producers like Rusal, Norsk Hydro and Rio Tinto operate most or all of their smelters using hydropower, dramatically reducing the impact on the environment. Rio has already signed supply deals with Nespresso and Apple Inc. for its sustainable aluminium.
Commodity trader Trafigura Group has set up a dedicated green-aluminium trading desk, betting that climate pressure will segregate the aluminium industry into two types. Metals trader Concord Resources Ltd. is also focusing on green aluminium, said CEO Mark Hansen.
“Five years ago there was very little discussion or care about the power source of the aluminum smelter,” said Hansen. “Today it is becoming very loud and very relevant.”
It is to be noted that a multiyear supply deal between Rusal and Glencore Plc, which buys the largest part of its aluminium recently came to an end despite the lifting of U.S. sanctions on Rusal.
According to Greg Barker, chairman of En+ Group, Rusal is likely to sell its metal on short term contracts, now on. One of the largest aluminium producers globally, Rusal has been a promoter for the development of a green aluminium market.
For Barker, the industry needs a “wake-up call” to focus to cutting its carbon emissions, he said in an interview. Certification organization like Aluminium Stewardship Initiative (ASI) is fostering responsible production, sourcing and stewardship of aluminium.
However, producers of low-carbon or green aluminium are not free from the headwinds of lower price and falling demand for the metal, which is stopping buyers from paying more for an abundant metal. Green finance lines are growing, which may help producers store green metal at a cheaper rate.
Concord Resources’s Hansen says he sees a battle between east and west when it comes to aluminium, as the west aggressing promoting green aluminium against coal powered metal.
Even in China, major aluminium producers are shifting base to Yunnan province to leverage on its hydropower. This indicates the slow emergence of a niche market for green aluminium around the world.
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