The European Green Aluminium Summit 2023, organised by Shanghai ECV International Co., Ltd., which took place on October 18-19 in Frankfurt, Germany, was enough to set the tone for the month of November. The summit addressed the urgent concern of reducing carbon emissions in the aluminium industry, which accounts for around 2 per cent of global anthropogenic outrush. The conference explored sustainable practices, green trends, and carbon reduction strategies throughout the entire aluminium life cycle, from production to recycling. Notable speakers from the industry, including organisations like Boston Consulting Group, ALCOA, Hydro, RIO TINTO, and Emirates Global Aluminium (EGA), shared their expertise and experiences.
The European aluminium sector is the flagbearer of the global environmental, social and governance (ESG) movement with its noble ideology of transforming major production lines into sustainable and eco-friendly ones. In the wake of the Russia-Ukraine crisis, energy prices skyrocketed in the European sector. This resulted in the partial unit closure of two major European aluminium producers, Speira and Norsk Hydro. They had to shut down their facilities due to high energy prices and market uncertainty. Speira closed down its German facility in Rheinwerk and had plans to focus exclusively on recycling and processing aluminium to create value-added products. Similarly, Norwegian aluminium giant Norsk Hydro shut down its smelter in Slovakia and ended primary production there, with only the recycling unit remaining open. These closures highlight the prevailing challenges in the European aluminium industry as overall production has declined to its lowest level since the 1970s.
Recorded Y-o-Y loss of 4.9% amidst Q-o-Q production increase in 2023
The first nine months of 2023 have accumulated almost 5.023 million tonnes, which is 4.9 per cent or 259,000 tonnes Year-on-Year lower than the 5.282 million tonnes recorded in the same period in 2022. The total world aluminium production during November 2023 was 5.893 million tonnes, of which Western, Central and Eastern Europe (including Russia) resulted for only 9.43 per cent or 556,000 tonnes.
According to the International Aluminium Institute (IAI), in Q1 2023, European aluminium production was at 1.666 million tonnes, which increased by 1.14 per cent or 19,000 tonnes on a Quarter-on-Quarter basis to reach 1.685 million tonnes in Q3 2023. The month of December is usually the slowest month of the year due to the annual Christmas festivities in the Western Hemisphere.
London Metal Exchange live price analysis
The London Metal Exchange, live price chart, showed overall dissipation in aluminium price trends with the lowest marked rate on August 21 at US$2,068.50 per tonne. Though from October to November, the LME aluminium prices remained range-bound at US$2,100 per tonne to US$2,200 per tonne, at the beginning of December, the prices began to deflect again, marking the second lowest rate of the year on December 11 at US$2,082.50 per tonne.
In a recent development, it has been seen that the London Metal Exchange (LME) is planning to introduce new metal contracts based on prices from the Shanghai Futures Exchange (SHFE) in an effort to boost China's influence on global metals markets. LME plans to pay a license fee to SHFE so that the proposed contracts would undergo clearing at the LME's clearing house. However, the success of these contracts depends on the development of substantial volume and liquidity. The move is part of China's efforts to encourage innovation and expand its reach globally, allowing Chinese players to exert more control over commodity prices. China is the largest aluminium producer globally, with a stronghold in the international commodity and trade market. LME's collaborative stance with China's SHFE might be favourable for the European metal industry at large.
Addition of aluminium to Europe's critical mineral list
In July 2023, the European Union (EU) finally added aluminium to the list of minerals and metals covered by the Critical Raw Materials Act (CRMA). The Act is crucial to the EU's strategy of staying competitive with the United States and China in the global race to decarbonise. The initial exclusion of aluminium from the CRMA was met with outrage from the industry, with the Federation of Aluminium Consumers in Europe criticising EU policy-makers for their misguided decision. The last-minute inclusion of aluminium, along with its upstream feeds of bauxite and alumina, highlights the criticality of aluminium to the green revolution and Europe's increasingly vulnerable security of supply.
Inflation in Germany impacts the European aluminium sector
The German aluminium industry faced significant declines in orders, and many companies had to introduce short-time work and cut jobs. The situation worsened for one in seven companies, and 40% expected more negative impacts in the year's last half. Three-quarters of respondents think Germany's competitiveness as an industrial location is low, with none rating it as high. The President of Aluminium Deutschland called for policy-makers to recognise aluminium's central role in the Green Deal and called for urgent action to defuse the crisis until green energy is available nationwide and cheaply. Germany is the hub for automobile castings and other manufacturing jobs in the UK. The country's current condition mimics the hyperinflation faced by the Weimar Republic just after World War I (WW1), 1921-1923.
Overview of the European Green Deal
The European Green Deal is a progressive and all-encompassing policy initiative introduced by the European Commission (executive division of EU) in December 2019. This initiative is a testament to the EU's pledge to become the first climate-neutral continent by 2050 and serves as a comprehensive plan for sustainable growth, environmental conservation, and a just, inclusive transformation towards a green economy.
The origins of the European Green Deal can be traced back to the political priorities established by Ursula von der Leyen in December 2019, who took office as President of the European Commission. The Green Deal was a central element of her agenda, reflecting the increasing urgency and global consensus on addressing climate change and environmental issues.
The deal was formulated in response to the European Parliament's declaration of a climate emergency and the notions made under the 2015 Paris Agreement, which aims to restrict global warming to below 2 degrees Celsius above pre-industrial levels. Recognising the pressing need for radical and immediate action, the European Green Deal seeks to mobilise resources and policies across various sectors to realise climate neutrality by 2050.
Why is recycling the need of the hour in Europe?
The need for a cleaner and greener future is encouraging the introduction of innovative recycling programmes that can extract the optimum amount of raw material from used aluminium scrap. This is beneficial for the environment as aluminium is 100% recyclable, and its transformation requires 95% less energy than primary aluminium production. Moreover, aluminium production from bauxite ore releases toxic red mud, which is detrimental to the ecosystem. Mining grounds, once utilised, turn into barren lands where no vegetation or livelihood is possible. Thus, aluminium recycling is a far more eco-friendly option with only one fundamental constraint, which is global awareness.
Necessary shift to renewable energy
With the closing of major smelters in the sub-continent because of an everlasting power crisis, it is imperative that Europe move toward a renewable energy source. Hydro is one of the world's largest renewable energy producers, with its operational roots in the European sector. Its clean energy-producing divisions, like Hydro Rein and Hydro Energi, have successfully forged power purchase agreements (PPAs) with global associations for a smooth transition from fossil fuel to green energy in Europe. US-based GenHydro has also embarked on a power deal with EU's EREN Groupe to enhance the supply and affordability of green hydrogen in France and Germany. One of Europe's largest renewable energy providers, Statkraft, has seen increased activity in December with the signing of a power supply pact with Aludium for the latter's aluminium-rolled products manufacturing line.
Highlights from COP28
The 28th United Nations Climate Change Conference (COP28) that took place from 30 November to 13 December 2023 in Dubai, United Arab Emirates, was a prime foreground for industry stalwarts to meet and discuss the effects of industrial pollution on Earth's climate. European countries actively participated in this international event, where they condemned greenwashing and promised to adopt cleaner methods of material production.
Two of the primary measures to curtail carbon emissions in the European aluminium sector are:
Carbon Border Adjustment Mechanism (CBAM) - The European Union has introduced a new policy called the Carbon Border Adjustment Mechanism (CBAM) to address the issue of carbon emissions during the production of carbon-intensive goods that are imported into the EU. The CBAM aims to establish a fair price for the carbon emissions generated in the production of these goods, as well as encourage cleaner industrial production in non-EU countries.
A policy was put into effect by October 2023, in coordination with the phase-out of free allowances allocation under the EU Emissions Trading System (ETS), to encourage the decarbonisation of the EU industry. The CBAM guarantees that a price has been paid for the carbon emissions generated in the production of particular products imported into the EU, thus ensuring the EU meets its climate goals. The CBAM is also designed to align with WTO regulations, making it an impartial and sustainable policy for all parties involved. The only trouble that European manufacturers might face is the stark decline in imports, making them more self-reliant or solely dependent on recycling schemes.
Deposit Return Scheme (DRS) – This innovative drive will ensure that the bottles or aluminium cans received by the Reverse Vending Machines throughout the continent will offer cash in return. The prevailing stage of DRS implementation among European countries can be divided mainly based on three factors: countries with DRS already implemented, countries that have adopted the legislation already, and countries with ongoing discussions about DRS implementation. European legislations like Iceland, Estonia, Slovakia, Romania, Germany and Norway have successfully introduced cash-redeemable DRS in their vicinity. Belgium is the only EU state with the determination of not having a DRS in the future as well.
According to available information, DRS Administrator was founded by a conglomeration of four non-profit professional associations that represent producers and retail, covering 80% of the products in plastic bottles and aluminium cans on the Slovak market and approximately 3,200 commercial establishments. Slovakia launched its DRS system on January 1st, 2022, becoming the 11th European country to do so, and it reportedly only took ten months to complete. The DRS IT System integrator in Slovakia is Sensoneo, a leading company in smart waste management. The return rate for the first year of DRS was reported to be 71%, with 820 million beverage containers collected out of 1.1 billion containers placed on the market. The return rate for the second year of the DRS in Slovakia is reportedly 90%.
European Packaging market
The global usage of aluminium packaging is augmenting due to the spiking demand for sustainable and safe packaging. The beverage can industry is the largest contributor to this demand. However, the post-Covid era has impacted the industry due to shifting patterns of beverage consumption on a global scale. North America, China, and Europe are the major users of aluminium beverage cans. The market for aluminium beverage cans is expected to increase in these regions, particularly in the US, Europe, and Brazil.
Responsible European recycling organisations
Alupro, the UK-based Aluminium Packaging Recycling Organisation, has recently published the Alupro Impact Report, which evaluates the effectiveness of its teaching programs and initiatives to achieve a 100% recycling rate for aluminium packaging in the UK by 2022. Alupro has expressed concerns about the viability of a Deposit Return Scheme (DRS) for aluminium beverage packaging, citing issues with its implementation across the entire supply chain and its effectiveness in improving packaging sustainability and recycling rates. They have highlighted the challenges of printing unique codes on containers at high speeds, the need for costly technology and reduced factory throughput.
The Executive Director of Alupro, Tom Giddings, has outlined the issues with an operational DRS system in detail. He believes that a well-designed DRS, similar to those in Finland or Denmark, is essential to achieve this goal. Despite this, Alupro emphasises the success of aluminium drink cans in the circular economy, with an impressive UK recycling rate of 82%. While the metal industry aims to achieve 100% beverage can recycling by 2030, Alupro is cleaning Europe's aluminium packaging sector with productive initiatives like "MetalMatters" or #FoilFriday.
Other mentionable recycling organisations from Europe that are leading the green revolution are Rick Hindley's PODBACK and the aluminium can-collecting non-profit organisation Every Can Counts. Podback is a kind of aluminium coffee pod recycling organisation that helps divert a massive amount of used coffee capsules from landfills, helping induce a closed-loop material cycle.
Circular economy in Europe
Many European aluminium brands have already been affiliated with the Aluminium Stewardship Initiative (ASI) so that the responsible sourcing of standardised aluminium is carried on in the value chain. Aluminium's infinite recyclability makes it a circular material, which means the non-ferrous metal can retain its original properties even after vigorous rounds of transformation. The European Union's urge to shift toward renewables for mass production is driving the sustainable aluminium economy. Automobile component manufacturers and car-body designers like Alumobility and Stellantis are also considering the introduction of closed-loop material recycling in their flagship production lines. The emergence of the circular economy has overseen the propulsion of futuristic schemes like Life Cycle Assessment (LCA) and Extended Producer Responsibility (EPR), which are self-explanatory. LCA is important for determining the shelf-life of products, while EPR helps manufacturers track their own products so that they can be returned to the facility for recycling purposes.
In conclusion, Europe's aluminium sector is slowly transitioning toward the adoption of renewable energy and green manufacturing methods so that it can keep up with the global call for carbon neutrality by 2050. This has garnered international attention, and other energy-intensive continents are following Europe in its eternal quest for a carbon-less future. The industry's success in the long term will be heavily reliant on its ability to uphold sustainable practices, foster ongoing collaboration, and embrace technological innovation.
Europe's leadership in integrating green energy into the aluminium sector has positioned it as a global leader in responsible aluminium production, thanks to its progress towards carbon neutrality, energy efficiency, and circular economy practices. To maintain this positive trajectory, the industry must continue to invest in green technologies and work together across the value chain. If you are interested in learning about the global aluminium dynamics in the upcoming time, do not forget to pre-book AL Circle's specially curated report citing industry forecasts, Global Aluminium Industry Outlook 2024.
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