The International Aluminum Institute published a report outlining how the aluminum industry can reduce its emissions.
Manufacturers of metals are increasingly under pressure to modernize their production processes and make them “greener.”
In recent coverage, MetalMiner’s Stuart Burns has touched on China’s latest Five-Year Plan and its environmental implications for the country’s massive steel and aluminum sectors. Producers in Europe, meanwhile, have argued the continent’s stricter environmental standards and regulations put it at a competitive disadvantage.
On the other hand, decarbonizing and becoming “greener” is also becoming more and more of a branding opportunity.
“Rusal is at the forefront of promoting its primary metal as coming wholly from renewable (hydroelectric) sources,” Burns wrote last September. “European metals producers may not have such a clear advantage in terms of power supply.”
So, what does the industry need to do to keep up with the times and meet emissions targets?
IAI underscores three pathways to reducing emissions
The International Aluminum Institute recently outlined what it called three “pathways” for the aluminum sector to reduce greenhouse gas emissions.
In its report, the International Aluminum Institute outlined “realistic approaches” to emissions reductions. The Institute outlined the approaches in line with the International Energy Agency’s Beyond 2 Degree Scenario.
Despite howls of protest from consumers, the Biden administration has doubled down on the Trump administration’s trade barriers with its latest move on aluminum tariffs.
The administration recently slapped semi-finished flat rolled aluminium anti-dumping duties on 18 countries supplying the US market.
Previous administrations’ focus on China — first on extrusions in 2011 and then foil and sheet in 2018 — succeeded in bringing down imports from 620,000 metric tons in 2017 to 170,000 tons last year, Reuters reported.
However, the wider Section 232 10% tariff is so riddled with exclusions and special exemptions that imports from the rest of the world have continued to make up a significant proportion of the market supply landscape.
Imports of sheet, plate and strip totaled 1.3 million metric tons in 2019. That represented about 62% of total aluminum product imports that year, according to Reuters. Although volumes shrunk sharply to 836,000 tons last year, this was due to the broader COVID-19 disruption to the U.S. manufacturing sector.
Total semis imports last year fell by 20%. Domestic shipments dropped by only 13% through November, suggesting the imposition of preliminary duties in October was already impacting buyers’ decisions.
According to Reuters, the new duties hit seven of last year’s top 10 product suppliers to the U.S. market, including South Korea, Germany and Turkey.
Canada, Saudi Arabia avoid aluminum tariff
The duties spared Canada, however, from which imports increased by 17%. They also spared Saudi Arabia, where Alcoa retains a close relationship with the Ma’aden smelter and rolling mill, despite having divested its 25.1% shareholding in 2019.
That Alcoa and its Saudi partner should essentially get an exemption comes as no surprise.
This morning in metals news: amid GFG Alliance’s financial crisis, ArcelorMittal has reportedly asked for cash upfront to supply Sanjeev Gupta’s steel mills; meanwhile, a so-called “green hydrogen” facility in Germany has started operations; and, finally, the LME three-month aluminum price has trended sideways this month.
Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.
ArcelorMittal to ask for cash upfront to supply GFG mills
This morning in metals news: the US Court of International Trade rejected a tariff exclusion process challenge; meanwhile, a metals trader ordered 10,000 tons of copper blister and got something else; and, finally, aluminum is gaining popularity as a material for outdoor living products.
US Court of International Trade rules on Section 232 tariff exclusion process
Michigan-based metals supplier Thyssenkrupp Materials NA, Inc., challenged the Section 232 tariff exclusion process, arguing it leads to “exclusions on an application basis to specific requestors and not automatically to all importers of a particular article, creates a non-uniform tax across the United States in violation of the Uniformity Clause of the Constitution.”
Former President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to impose tariffs in 2018. Trump imposed tariffs of 10% on imported aluminum and 25% on imported steel.
In addition, US importers could apply for exclusions to the tariffs through the Department of Commerce.
Thyssenkrupp Materials NA asked for two forms of relief. They asked for refunds on duties already paid, plus interest, for any good that any requestor has received an exclusion. Furthermore, the importer asked for an injunction preventing Customs and Border Protection from collecting duties on any product that has been granted an exclusion by any requestor.
The government, meanwhile, argued the importer did not make a claim for an exclusion that had been denied. As a result, it argued the importer had not received injury from the process.
The three-judge panel sided with the government in the case.
“Because the exclusion process promulgated by Commerce does not violate the Uniformity Clause of the Constitution and does not reflect an improper construction of the President’s Proclamations, the Government’s motion to dismiss is granted,” the judges concluded.
The Aluminum Monthly Metals Index (MMI) picked up 6.3% for this month’s reading, as the China aluminum sector could get a price boost from the 14th Five-Year Plan. Furthermore, the Department of Commerce made anti-dumping and countervailing duty determinations on aluminum sheet.
In short, it could mean a tightening of supply and potentially rising prices in the medium term.
“The environmental targets are part of the new Five Year Plan and, as such, will evolve over the coming years rather than be applied over coming months,” Burns noted regarding the plan’s impact on aluminum. “But it may add a little fuel to investors’ interest in a tightening supply market narrative that underpinned copper and nickel prior to the recent selloff, and to a lesser extent that for aluminum.”
Overall, Burns said he expects China’s latest plan to be supportive rather than outright bullish in the short to medium term.
Xinhua, the state-run news agency, reported this month that China’s 14th Five-Year Plan will promote “green development and facilitate the harmonious co-existence between human and nature during the 14th Five-Year Plan (2021-2025) period, according to a government work report submitted Friday to the national legislature for deliberation.”
One of the world’s leading producers of low-carbon aluminum, UCRusal, announced a new collaboration with Japanese automotive component manufacturer Kosei, signifying yet another step in its over 30-year journey.
Last week, the Russian aluminum giant Rusal said Kosei had selected it to be its global supplier of high-quality aluminum alloys.
Kosei, set up in 1950, designs and manufactures vehicle wheels and autoparts. The firm operates from seven countries.
In the last 30 years, Rusal has proved to be a key partner of Kosei. Rusal has supplied the Japanese company with primary foundry aluminum alloys. Kosei uses in the material in factories in India, Japan, Thailand, and the US.
This morning in metals news: US industrial production picked up in January; global aluminum output also rose in January; and, lastly, General Motors reported a milestone in the construction of a new battery cell manufacturing plant in northeast Ohio.
US industrial production rises
US industrial production rose by 0.9% in January, the Federal Reserve reported.
Furthermore, manufacturing output rose by 1.0%. Meanwhile, mining output picked up by 2.3%.
Industrial sector capacity utilization reached 75.6%, up by 0.7 percentage point. The rate, however, is down 4.0% from the long-run average from 1972-2020.
Whether the new Biden administration creates a more insightful or sophisticated approach to trade remains to be seen.
But, if nothing else, a new administration is a chance for a reset on policies that have not worked as intended under a previous administration.
Aluminum tariff policy
The previous administration’s Section 232 tariffs on aluminum of 10% were well intentioned. The tariffs aimed to try to reverse the decline in US domestic aluminium smelting capacity.
In recognition of aluminum’s role in defense and aerospace applications, the government viewed the growing level of imports as a threat to national security. As such, creating a barrier to imports intended to allow US smelters to operate profitably and encouraged firms to reopen idled capacity. Furthermore, the hope was that, in time, firms would open new smelters.
The previous decade had been brutal for the US aluminium smelting industry.
By 2017, capacity utilization had fallen to 37%, according to Reuters.
Many hailed the strategy as a savior for the smelting industry. However, consumers would ultimately have to pay the bill.
But even accepting that the COVID-19 pandemic made 2020 a far from typical year, it has become clear the tariff strategy has not worked on a number of levels.
While the inflationary cost of finished goods has been minor, the aluminum content even of a can of beer is a small fraction of the total product cost. It remains true that consumers have had to foot the bill.
It was always the intention that domestic producers would raise their prices to the import plus tariff price. The corresponding uplift was what was supposed to allow them to operate profitably again, to arrest the decline and reopen idled capacity.
Annualized production rose to 1.15 million tons at the end of 2018 from 750,000 tons a year earlier. The increase, however, proved short-lived. By the end of last year, national annualized production had fallen to 920,000 tons and capacity utilization to about 50%, Reuters reported.
Equally worrying the post states, there has been no new smelting capacity. The United States remains as dependent as ever on imports of primary metal.
Aluminum tariff and Canada
Buyers will remember the spike in prices that followed the reinstatement of tariffs on Canadian aluminium predicated on the “surge in imports,” as the Trump administration claimed at the time.
The reality was Canadian-origin metal had simply made up for the absence of Russian metal following Rusal’s pivot away from the US, largely to Asian markets, following the earlier sanctions on owner Oleg Deripaska. Russian imports collapsed from 725,000 tons in 2017 to only 136,000 tons last year. Shipments from Canada simply filled the gap, rising 10% in 2019.
The previous administration seemed to accept that imports from Canada should not be considered a strategic risk. Ultimately, it removed the tariff in September 2020.
But what of potential suppliers elsewhere? Would it not be of value to the US to widen its non-tariff supply base?
Biden rescinded permission to exempt the UAE recently for what seemed like political rather than national security reasons. China has never exported primary metal, so it remains irrelevant to this policy.
The years ahead
How the US handles imports of semi-finished products going forward will be the topic of a separate post. The US has inherited a fractious trade landscape as a result of the last few years.
It does so at a time of a fundamental re-evaluation of its trade priorities. Many would argue that re-evaluation is long overdue.
That re-evaluation includes its relationship with China. In that vein, the US is better off by working in cooperation with its allies and neighbors than the unilateral policies of the previous administration that have largely failed to deliver benefits.
It spurs irrational investment and sucks in unwary investors. Furthermore, it encourages passive funds to up their allocation, even if only by fractions of a percent.
But with some $14 trillion invested in US equities alone, even a modest increase in passive investments into ETFs would reap significant rewards in fees.
As such, it may be not surprising that the big boys — like JP Morgan, as reported in Bloomberg, and Goldman Sachs, as reported in the Financial Times (admittedly focused more on oil) — are calling the start of the next commodities super cycle.
Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.
Commodities super cycle?
On the face of it, they appear to have some foundation.
As a separate post in the Financial Times observes, metals, agricultural and oil commodity indices have risen up to 40% since last July.
In part, this is due to a surge of interest in green-energy projects.
The EU, US and China have all promised to spend big. Hydrogen projects alone could receive €30 billion from the EU.
Copper has rallied to eight-year highs, around $8,375 per ton. The metal is benefiting from strong Chinese demand and the prospects for a more rapid transition to electric vehicles gains momentum. Glencore is quoted as saying world copper demand will double by 2050 and that mine investment is insufficient,
All of that certainly makes for a bullish landscape.
This morning in metals news: Novelis announced the commercial availability of a new class of high-strength automotive aluminum; meanwhile, the United States Geological Survey updated its Mineral Deposit Database for niobium; and the global aluminum market surplus more than tripled from 2019 to 2020.
Novelis announces new high-strength automotive aluminum
Atlanta-based Novelis today announced it will offer a new “ultra-high-strength” automotive aluminum solution.
The product, Novelis AdvanzTM 7UHS-s701, offers “lightweighting potential of up to 40% over existing ultra-high strength, hot-formed steel solutions.”
“The s701 technology represents the future of high-strength material in automotive applications and offers a clear alternative to the most advanced high-strength steel products,” said Philippe Meyer, senior vice president and chief technology officer at Novelis. “Aluminum is already the material of choice for lightweighting, and now we are offering a solution that helps automakers design even safer, lighter and better performing vehicles.”
“Niobium is vital to many sectors of our infrastructure and manufacturing economy, and the United States is 100 percent reliant on other countries for it,” said Jeff Mauk, USGS lead scientist for USMIN. “Updates to our database can help weigh the potential for domestic niobium production against the need for future trade agreements.”
