Addressing the future of the aluminium industry in Europe

"Industrial change to build sustainable EIIs facing the resource efficiency

objective of the Europe 2020 strategy"

6 July 2011

2

Outline

• The aluminium industry in Europe

• Key competitiveness challenges

• The energy and resource conservation challenge

• Conclusions

3

Aluminium is an important industry in EU27EU27 2010

Direct jobs 250.000 Number of plants

Mining 2.3 mio tonnes Mine production 4

Refining (alumina) 5.9 mio tonnes Alumina refining 9

Primary production 2.3 mio tonnes Primary production 21

Primary capacity 3.2 mio tonnes Extrusion plants +200

Recycling 3.7 mio tonnes Rolling mills 50

Refiners (recycled) +150

Production of semis Remelters (recycled) +100

Rolled products 4.0 mio tonnes Casters +2100

Extrusions 2.6 mio tonnes

Castings 2.1 mio tonnes Main markets

Wire, slugs, powder… 0.8 mio tonnesOthers

7%

Engineering

14%

Packaging

17%

Building

26%

Transport

36%

4

The evolution of the EU Aluminium supply

The electricity prices lead the EU 27 smelters to work at reduced capacity (72%), so imports increased

(EU15 data until 1999, EU25 data 2000-2004, EU27 data 2005-2010)

0

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

14.000.000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Alu

min

ium

in t

onnes p

er

year

Primary production Total recycling Net-imports

33%

21%

46%

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The aluminium value chain

Bauxite/alumina

Primary aluminium

Semi fabrication Remelt

Aluminium in productsPrimary aluminium production

•Equity •Long-term power supply

•Technology • Expertise in materials

•Close to customers

•Innovation

•Expertise in materials

RefineApplications

recycling

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A strategic material all along its value chain

• Close interlinks all along the value chain.

• Loss of primary aluminium know-how/production would damage the whole supply chain, including design, innovation and end-use.

• SME’s active from innovation to recycling need the proximity of primary metal production for the right alloy and tailor-made shapes.

• Reliance on imported metal against SMEs interest.

• EU needs to retain existing primary aluminium production and to recreate conditions to build new ones.

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Aluminium saves energy, reduces emissions & is safe

Key challenge:

Current regulation on cars and on vans both discourage the most straightforward emission reduction measure, which is light weighting.

Transport represents 25% of European emissions and the energy required to move a vehicle is proportional to its mass

1 kg of aluminium in a road vehicle = -20kg of CO2In average, a European car contains 140kg of aluminium

Aluminium has been used in 9 million crash management systems (CMS) produced in Europe in 2008.

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Towards sustainable buildings

40% of global energy is used in buildings and construction. Demolition represent 25% of EU wasteflow

Key challenge:

European criteria for sustainable buildings should include end-of-life recycling (EoL) in the environmental assessment in order to promote recyclable materials.

Intelligent buildings incorporating aluminium

systems can decrease energy consumption by up to 50%

During demolition, 96% of aluminium is collected

and recycled

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Collection, Sorting & Recycling of Packaging makes sense!

Level playing field betweenthe various materials andpackaging solutions in aproperly functioninginternal market isessential.

Some local authoritiesfavour specific options(e.g. reuse over recycling)without a properenvironmental assesmentor taxation measures thatmay lead to market distortion.

Key challenge:

Promote cost-efficient non-discriminating systems not favouring one type of

material and/or packaging over another. This can be either incentive-based (deposits, scrap value) or via separate collection systems.

The amount of aluminium packaging effectivelyrecycled greatly depends on the efficiency of the collection schemes with huge discrepancies within the EU.

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Aluminium: 100% recyclable for ever

• In Europe aluminium enjoys high recycling rates, ranging from 63 % in beverage cans to more than 95% in building, construction, automotive and transportation.

• Aluminium has unique recycling qualities: the quality of aluminium is not impaired by recycling - it can be repeatedly recycled.

• Aluminium recycling saves energy: recycled aluminium saves up to 95% of the energy needed to produce the primary product.

• Aluminium recycling is economical: it uses less energy and recycling is self-supporting because of the high value of used aluminium.

Key competitiveness challenges

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Endangered Primary Smelters (EU+EFTA)

Blue: mainly due to the existence of Long Term Contracts

Already closed

Severe threat

No immediate

threat

Under threat

Not members

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Key competitiveness challenges

• Aluminium market is a worldwide commodity and the European industry has to compete in this global market.

• All aluminium related prices are linked to the London Metal Exchange (LME).

• Regionally imposed costs, such as those arising from the EU unilateral environmental targets cannot be passed on consumers.

• Aluminium production requires long-term energy contracts/supply which are the norm worldwide.

• Without competitive and predictable energy prices there will be no new investments in aluminium smelting in the EU.

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Aluminium primary production is energy intensive

Source: CRU

37.00%

34.80%

9.80%

12.30%

6.10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1

other costs

carbon

labour

energy

alumina

Energy is the key cost which EU smelters can/mustmanage to remain internationally competitive, and

ETS cost pass-through is an important part of it.

Primary Aluminium sector in Europe

0 %

10 %

2 0 %

3 0 %

4 0 %

5 0 %

6 0 %

7 0 %

8 0 %

9 0 %

15 17 19 2 1 2 3 2 5 2 7 2 9 3 1 3 3 3 5 3 7 3 9 4 1 4 3 4 5 4 7 4 9 5 1 5 3 5 5

Allowance cost per tonne C02 (Euro)

Cost CO2 indirect emissions/GVA 2008

EU Primary Aluminium Average Operating Costs (2009)

The energy and resource conservation challenge

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Major achievements of the EU industry

• The level of use of electrical energy for primary production is close to

the achievable limit of the current technology

• However 48% of the electrical energy needed to produce primary

aluminium comes from renewable sources

• Emissions of CO2eq per tonne of primary aluminium were reduced almost 50% since 1997, with PFCs emissions reduced by 90% since

1990 (Source: EAA SDI report 2010)

• Emissions of CO2eq per tonne of recycled aluminium were reduced

over 50% since 1997 through combustion improvements

• Benefits in the use phase:

- Over 6% of avoided CO2 emissions in cars

- Prevention of the spoilage of food, whose CO2 content is very high

- Indirect benefits of the energy efficiency in buildings

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EU used to be a net scrap importer…and now?

-1.000.000

-800.000

-600.000

-400.000

-200.000

0

200.000

400.000

balance 108.000 54.000 50.000 -31.000 -34.000 32.000 52.000 154.000 276.000 139.507 39.967 -104.10 -117.56 -148.24 -434.63 -287.21 -690.15 -695.33 -865.02 -724.18

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009est.

2010

EU scrap balance in EU (net imports/exports)

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Aluminium scrap is energy containing material

• Recycling aluminium is one of the less energy consuming recycling processes.

• Aluminium scrap can be considered as an energy saver.

• Europe’s mature and increasingly green economy is the largest aluminium scrap generator in the World.

• Europe, by tradition aluminium scrap importer, has become in a decade a substantial net scrap exporter.

• Emerging economies, short of energy production (i.e.: China), are very interested by European scrap.

• Countries like Russia have raised 50% aluminium scrap export duties, and Ukraine a total export ban.

Conclusions

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Conclusions

• Support our industry’s assets towards resource efficiency:

- Stop lightweighting discrimination in transport/environmental policy

- Promote the appropriate recycling approach

- Promote non-discriminating recycling systems

• Grant immediate access to real (i.e.: full) CO2 cost pass

through compensation

• Facilitate negotiation of long term contracts for our sector

• We need a level playing field for the scrap and recycling in

order to keep a chance to lower our energy needs by using

the aluminium scrap generated in Europe by ourselves.

�Failure to provide the right operating conditions will lead to the closure of this vital industry in Europe

Thank you for your attention