World production of aluminum from 2000 to 2022

The use of aluminum in the world is constantly growing, substantially in step with the production of primary metal, which is progressively moving towards the East, with the increase in the number of producers.

The picture of world primary aluminum production, which in 2021 recorded a record of over 67 million tonnes produced, has changed profoundly in the last twenty years. China's role has grown dramatically, from less than 3 million tons in 2000 to over 38 million tons in 2021, covering almost 60% of world production.             

The share of the other Asian countries and the Gulf countries has increased, in practice also doubling, Africa is also growing, a slight decrease in Oceania, a strong decrease in America, while Europe shows a two-faced condition, with the collapse of aluminum production in the European Union and growth in the east of the old continent.

In the general context, the surge in China undoubtedly emerges, the evident result of a precise industrial strategy supported by government subsidies and monetary and commercial policies designed for the purpose. The result is that Chinese manufacturing companies have grown exponentially to become world leaders in aluminum production.

Aluminum production in Europe

The percentage share of primary aluminum production of European countries, the EU plus the rest of Europe, has fallen in the world context from 30% in 2000, with 7.5 million tonnes out of a total of almost 25 million, to approximately 12% in 2021, with 7.3 million estimated.

Already in 2017, with an output in Europe of 7.8 million tons, over 70% of the primary used was produced outside our old continent. The decline has also been particularly serious in the European Union, especially in recent years.

Since 2005, the production of primary aluminum has in fact gone from 3.2 million tons/year to just under 2 million; for some time some countries already producing, such as Italy, the United Kingdom and the Netherlands, had definitively ceased production, mainly as a result of high energy costs.

At the beginning of 2020, only 13 smelters were in operation in the EU, meaning that since 2000 almost twenty plants had closed and in 2021 several other EU smelters were announcing cuts or suspensions of production, with an estimated drop of 18 -20% compared to 2020.

Several relevant situations are underlined:

• In October 2021, the only Dutch smelter announced the reduction of production by 60-70%, at least until the beginning of 2022, due to high gas prices;
• In the same period, an aluminum producer in Slovakia announced production cuts of more than 10% on the back of sharp growth in electricity prices, record prices of emission allowances and insufficient compensation by the state;
• A few months later, a US company declared its intention to stop producing primary aluminum in a Spanish plant for two or three years;
• At the same time, the production of the largest smelter in Europe is reduced, again due to high energy costs.

In the same period, the closure of the only smelter in Montenegro, the 50% reduction in the production program envisaged by an important Slovenian company, while for the main Romanian smelter a significant reduction in the production program foreseen for 2022 was announced.

The main reasons for the financial pressure on aluminum smelters in the EU and for the cuts or forced closures of production are of course the high energy prices in Europe, but other factors also weigh, such as:

• The high cost of labour;
• The lack of a serious upstream industrial strategy;
• The collapse of investments;
• Increased pressure from strict environmental legislation.

This very serious situation is finally being assessed in all its drama for future scenarios also by institutions in the sector which instead of defending the entire aluminum supply chain in the EU have always sided in favor of the powerful multinationals, or perhaps it is better to say some top-managers of the same.

At this point we can only underline for the umpteenth time the absolute unreasonableness, inconsistency and gravity for the competitiveness of the complete aluminum supply chain in Europe to keep alive the import duty on raw metal in the EU. The cancellation of this measure is certainly not the answer to all the needs of the sector, but it is very clear that this European Union duty on a raw material for which there is a serious domestic deficit does not respond to the principles for which it was imagined many decades ago , because it has absolutely not protected the primary sector of the old continent. On the other hand, this tariff was very efficient in damaging the transformations, downstream processing, casting foundries and end users, i.e. over 90% of the light metal in the EU.

A failure and serious damage, yet this indisputable strategic error for the industry and manufacturing of our old continent is still there, a tariff spectrum that is a brake on the competitiveness of the downstream.

The importance of Russian green aluminum for the EU downstream

Maintaining key metal suppliers to the global market is of paramount importance. The possible exclusion of the large Russian producers from the usual light metal trading system, as proposed by some market operators, would undoubtedly have very serious quantitative and qualitative consequences for a large number of companies in the EU, an area as we have seen deficit for more than 80% of its primary aluminum requirements.

A similar situation had already been observed in 2018, during the period of sanctions imposed by US President Trump on Russian producers (and canceled after a brief and unfortunate application), which led to serious destabilization of the global aluminum use chain, with a immediate increase in the prices of light metal products and its alloys of around 30% in the world, and in particular in Europe.

If this situation were to occur today, combined with the high electricity costs and high inflation in some important areas, the transformations, processes, finishes, final applications of all kinds of aluminum would be severely at risk in the European Union, from automotive to construction, electrical engineering and packaging, just to mention the best-known segments.

In view of the equally well-known eco-sustainability path that the EU has rightly undertaken to pursue, it is clear that the impossibility of having competitive primary aluminum with low carbon emissions like the Russian one would force consumers to use other sources of supply and many would be forced to focus on purchasing primary aluminum with a higher carbon footprint, as is the case with many Asian productions.

With the introduction of the carbon offsetting mechanism at the borders, the extra costs for EU converters and downstream users would be a catastrophe. Basically, as all analysts have been claiming for some time, limiting access to Russian aluminum would interrupt the current market dynamics, cause price increases, volatility and create interruptions in the aluminum supply chain all over the world.

Without a doubt this will concern in particular the thousands of SMEs in the European downstream aluminum sector which, already penalized for decades on equal access to the raw material, will have to lose further competitive competitiveness compared to the Asian producers of semi-finished products, foundry castings, parts, components and light alloy products, being deprived of a reliable qualitative and eco-sustainable source of aluminum.

Analysts essentially agree in recalling that the presence of Russian volume and quality suppliers plays a stabilizing effect on the market and a role that is difficult to replace for the aluminum supply chain in the EU.

Looking at the interests of the entire light metal supply chain in the European Union, an area as is well known at risk for the competitive supply of raw metal at the same level, it would be real suicide in a very delicate moment of the market to accept forcing on the market which, to the advantage of the budgets of some large companies and the salaries of some large managers, would lead to distortions, speculation, price increases, loss of competitiveness for the supply chain and serious risks for the downstream and processing companies and the use of aluminum in the EU.

Source: A&L Aluminum Alloys Pressure Diecasting Foundry Tecniques