Aluminium output lags demand
ALUMINIUM production remains stuck on a plateau in Australia while rival countries take advantage of a surge in demand. Ron Knapp, executive director of the Australian Aluminium Council, says substantial production expansion is taking place in southern Africa, the Middle East, China, Iceland and Russia as world demand continues to surge. Primary aluminium production has risen from 19.4 million tonnes in 1990 to 33.2 million last year and is estimated to reach 45 to 50 million by 2020.
Global primary production hit the milestone of 100,000 tonnes a day for the first time in February.
At present, Knapp says, only small, incremental increases in aluminium production capacity can be expected in Australia’s six smelters, with no new potlines under construction. The industry is relying on tweaking greater efficiency out of existing potlines’’.
Australian annual aluminium production has now been stuck just under two million tonnes for three years.
However, he adds, there is strong potential for a large increase in aluminium smelting here if the industry can be persuaded that its risk/ return equation for new investment is worthwhile. Consideration is being given to increasing smelting capacity by 75 per cent at a cost of $8 billion before taking into account what needs to be spent on additional electricity infrastructure.’’
He stresses that a robust policy climate’’ is critical to Australia benefitting from further investment in smelter projects. This includes a national greenhouse gas policy that provides an acceptable risk profile to allow longterm investments to be undertaken.’’
The aluminium industry finds itself front-and-centre in the greenhouse gas emissions debate because 90 per cent of its production in Australia uses electricity generated from black and brown coal. The industry is the largest single power user in the country, accounting for about 14 per cent of national electricity consumption.
The smelting industry has driven down its direct greenhouse gas emissions — from just over 6.2 million tonnes of carbon dioxide in 1990 to less than four million tonnes today, despite a substantially higher level of production. There has been about 60 per cent reduction in emissions per tonne of metal produced. Direct smelting industry emissions plus those from elec- tricity generators serving its demand account for about 6 per cent of Australia’s total greenhouse gases.
Alumina refiners have also cut emissions on a tonne-for-tonne basis, although a 64 per cent increase in output since 1990 has driven up total emissions 30 per cent. Efficiency actions taken by the refiners in this period are estimated to have cut their greenhouse gas emissions by more than 3.5 million tonnes a year.
Despite its greenhouse gas performance, the alumina/aluminium industry remains wary about the climate for new projects.
Knapp says that one of the contributors to an uncertain future for new smelting investment in the industry is the fact that the states have been trying to develop a joint emissions trading scheme in the absence of a national system. ‘‘ Decisions about major new investment here are on hold pending the emergence of long-term policy certainty. A national, not state, engagement is required.’’
He adds that capital investment in augmenting existing smelters is also at risk should the policy environment become ‘‘ hostile’’.
He points out that alumina refineries and aluminium smelters are high cost assets with long lives — 40 years and more. ‘‘ Any greenhouse policy needs to take into account the industry’s investment cycle and its need to ensure the competitiveness of its assets in the long term. The global aluminium industry needs policy certainty to invest in new capacity in Australia.’’
The industry’s role in the economy should dictate that its concerns are given due consideration, Knapp argues. It employs 15,000 people directly, he says and more than 5000 as contractors, mostly in regional areas. ‘‘ It has been a major investor in Australia for 50 years and has an important role in adding value to our mineral resources. It is an important element in the dynamism of the economy.’’
Australia’s standing as the largest global producer of alumina is also under potential threat. Chinese production in 2007 is predicted to reach 18 million tonnes. Australia’s production of smelter grade and chemical grade alumina from seven refineries grew last year to 18.4 million tonnes — up from 17.9 million tonnes in 2005, representing almost 30 per cent of world production.
Major investment in Australian alumina refining is under way, he says, with capacity set to exceed 20 million tonnes this year. ‘‘ There is likely to be substantial future additional investment, too.’’
Meanwhile, Australia’s position as the number one producer of bauxite is being sustained. Last year’s production from five mines reached 65 million tonnes, up from 62 million in 2005. Bauxite is the ore from which alumina is extracted. Aluminium is produced from smelting alumina. Australia has enormous bauxite resources — government estimates set reserves capable of economic development million tonnes.
Bauxite exports from Australia reached 5.7 million tonnes in 2006, valued at $127 million — compared with 4.9 million tonnes valued at $123 million in 2005.
Knapp says alumina and aluminium exports from Australia last year are estimated to have reached $11 billion in value, up from $8.6 billion in 2005.
In addition to the large export trade, 20 per cent of aluminium produced in this country is used in the local downstream industry: two rolling mills and 16 extrusion plants convert aluminium to sheet and fabricated products while there are more than 30 facilities engaged in aluminium diecasting, mostly using recycled metal from the automotive industry.
Australia also continues a profitable sideline in exporting aluminium scrap metal, much of it to China. Sales in 2006 reached 169,000 tonnes, worth about $374 million.
Policy climate is the key: Ron Knapp says Australia has potential for a large increase in smelting capacity