Alu­minium out­put lags de­mand

The Weekend Australian - Travel - - Resources - Keith Orchi­son

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.

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Pic­ture: Kym Smith

Pol­icy cli­mate is the key: Ron Knapp says Aus­tralia has po­ten­tial for a large in­crease in smelt­ing ca­pac­ity

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