The aluminum supply chain and the circular economy
The aluminum supply chain, in terms of circular economy, has never had to follow fashions: the circularity of our metal is a fact and has led Italy to always be on the recycling podium, reaching and going well beyond the targets places from Europe.
From 1990 to today, the aluminum industry in Europe has reduced its CO2 emissions by 55%. In recent years the theme of climate change, combined with sustainability issues, has led to very ambitious goals for the containment of greenhouse gas emissions, but as the years go by these goals are becoming more utopian than ambitious.
A number, which is often recurring, is how much Europe's greenhouse gas emissions represent, which stands at 8% compared to the rest of the world. European citizens represent 9.5% of the world population and live on 7% of the emerged lands.
The numbers above serve to remind us that often (together with the USA), Europe elevates itself as a champion of the globe, not realizing its very small weight compared to the other economies of the planet, with the emerging ones at the forefront, to which the crusades to saving the planet seem to have less appeal. The ecological transition, with the objectives of 2035 with the stop to the sale of combustion cars in Europe and 2050 with climate neutrality, I believe will have to be adapted to the real possibilities of implementation of the entire social fabric and not just industry.
The pandemic years have definitely broken the balance, showing the fragilities that have been created, highlighting how dependent Europe is in fact on emerging countries. China today covers 60% of the world's primary aluminum and 95% of magnesium, which is one of the main alloys of aluminum alloys. Silicon production also has an imbalance towards China with 60% of world production. With the Russian-Ukrainian conflict, energy has reached unimaginable peaks, reaching 400 euro MW/h for gas in August 2022, effectively seeing its cost increase with a ratio of 1 to 20.
The aluminum supply chain sector is recognized as being at high risk of carbon leakage, but, despite this, in Italy the compensations for indirect costs incurred by companies are reimbursed using only 7.1% of the proceeds from auctions for ETS, while in Europe they are used on average for 27% of proceeds. To make a comparison with Germany, German companies are recognized for 31.5% of the proceeds from auctions; in absolute terms for Italy they were 90 million euros, while for Germany 833 million euros. It is useless to hide behind a finger, the aluminum supply chain system in Italy has held up thanks to the ability of Italian entrepreneurs and managers to govern the chaos by resorting to flexibility which is the added value that has allowed us to always face our competition head on increasingly fierce and not always loyal.
In recent years, China has poured several hundred thousand tons of semi-finished aluminum into Europe, in light of very low labor and energy costs and thanks to the almost total lack of social and safety policies, which have done nothing but exacerbate even more so is the gap between European labor costs and those of China, which never misses an opportunity to support its industry with dumping maneuvers.
Europe and the energy transition
For energy-intensive companies such as those in the aluminum supply chain, hard to abate, in order to support them in the energy transition process there must be mechanisms that allow the maintenance of competitiveness not only towards non-EU countries, but also towards those countries within the Europe that are able to manage the aluminum industry in a more firm and effective manner.
The CBAM (Carbon Board Adjustment Mechanism), which in principle is an acceptable measure, seems to be implemented in ways that are difficult to apply and above all without control. We run the real risk of applying a counterproductive and ineffective regulation, which risks further undermining the competitiveness of our businesses.
More and more companies are trying to use production from raw materials with low CO2 emissions. Today we start from the design of the article to ensure that it can be produced as a result of the circular economy, but at the same time limits are imposed on certain impurities in aluminum alloys, thus creating a paradox. By limiting the permitted presence of some metals in the alloy, it is necessary to resort to the addition of primary aluminum, which as we know has a carbon footprint that is in antithesis to the direction taken.
It is therefore necessary to make a distinction between the objectives pursued and those that can actually be pursued. By acting with restrictions on the use of certain chemical substances, the path of the aluminum supply chain towards the circular economy is undermined.
Another important issue is that of the escape of scrap from Europe. The European legislator is trying to intervene, but even in this case the system is so loose that circumvention of the rule is just around the corner.
The challenge of electric mobility for the aluminum supply chain
I have tried to offer an overview of the field with a very linear analysis of what has happened in the last two years, leaving the biggest concern for last, namely the too sudden transition from internal combustion engine mobility towards electric motor mobility. It is useless to continue undaunted in one direction if the road that needs to be traveled is not yet ready. Without the guarantee of technological neutrality to achieve the decarbonisation objectives, we only run the risk of harming ourselves.
The indications that have arrived, and above all the implementation times, have arrived more by bias than from a real analysis of the situation of the infrastructures supporting a vision of electric mobility which today is not remotely achievable. A valid alternative, which the industry welcomes, is that of bio fuels in which leading Italian companies are also involved in the development of this alternative source of energy.
As always, the aluminum system in Italy will try to support the latter. However, we are aware that the first cracks have occurred regarding a possible shift/derogation of the 2035 agenda to stop the sale of cars with combustion engines.
In conclusion, from our privileged observation point, we see on the one hand the virtuous aluminum industry and on the other the danger that this excellence will suffer serious losses.
Since popular sayings are never wrong, I would like to remember one: "The right is in the middle"; this is not to contest the decarbonisation process, in which aluminum will certainly be an active and proactive part, but to underline that, if not governed adequately, it could also lead to problems of a social nature.
Source: A&L Aluminium Alloys Pressure Diecasting Foundry Tecniques