Tesla is ordering giant aluminum die-casting machines for its assembly line in Germany.
This giant aluminum die-casting machine is the size of a small house, and it will use a module to replace about 70 parts currently glued to the car chassis.
Aluminum is light in weight and high in strength. It is one of the preferred materials for electric vehicles, which means it can increase the extra mileage of electric vehicles and increase the safety of their exercise.
Aluminum will become one of the vital metals in the ongoing green revolution, not only because of its role in transportation, but also because of its use in renewable energy (especially solar panels).
But the problem is that manufacturing aluminum is a carbon-intensive industry, which accounts for about 3% of global emissions.
So the race to produce low-carbon aluminum now begins, because manufacturers want to differentiate their products in the changing consumer environment.
But the widening gap between "green" aluminum and "black" aluminum may undermine the current pricing model of the market, because the arrival of the "green premium" is not only much faster than many in the industry think, but may have already appeared.
The rugged road to zero
Aluminum smelting is an energy-intensive industry, and the carbon footprint of each producer mainly depends on the energy it uses. Hydropower production has a low carbon footprint, while coal has a high carbon footprint. Gas is somewhere in between.
Kulumis, vice president of the aluminum production line of equipment supplier Metso Outotec, said that on average, about 10 tons of carbon are produced for every ton of aluminum produced, but the global range may be between 4 to 18 tons.
Kulumis said that as more and more aluminum production in the world is transferred to China, the energy efficiency of the industry has deteriorated in this century, and coal is the main energy source used in China.
He made the above speech at the CRU World Aluminum (Virtual) Conference this week, where manufacturers lined up like a parade of low-carbon beauty.
British commodity tycoon Sanjiyev Gupta’s aluminum business is achieving rapid growth through the acquisition of low-carbon aluminum smelters such as Lochaber in Scotland and Dunkerque in France. It is also looking for more similar smelters.
Satish Pai, managing director of India’s Hindalco, said that India’s Hindalco aluminum smelter started from the disadvantage of relying on coal and is currently building its smelter to supplement solar power. The goal is to reach 100 megawatts by March 2021. This is a way to reduce per ton. A method with relatively low cost of metal carbon emissions.
As one of the world’s largest aluminum producers, China Hongqiao adopted a very Chinese-style solution, which is to demolish 2 million tons of production capacity in Shandong Province (coal), and build a new smelter and "green" aluminum in Yunnan, which is rich in water resources. Production center.
According to Ron Knapp, former chairman of the International Aluminum Association and special adviser to the current chairman of Hongqiao, the move will be completed at an ultra-fast speed by the end of the first quarter of 2021.
The ultimate goal of the industry is to achieve carbon neutrality by 2050. This goal may require redefining the aluminum smelting process itself.
ELYSIS, a joint venture between Rio Tinto and Alcoa, is developing a carbon-free aluminum smelting process that eliminates all direct greenhouse gases emitted during the aluminum smelting process. Rio Tinto's aluminum marketing department head Tolga Egril Meze said that the project partner Apple has completed the first acquisition.
However, many manufacturers, especially those in China, will find that the road to zero carbon emissions, if not impossible, should be long and tortuous.
The divergence between "green" aluminum and "black" aluminum will only expand further.
Market segmentation
Although (mainly hydropower) producers are eager to differentiate their products, the "green premium" remains elusive so far.
This is due in part to the lack of consensus on how to accurately calculate "green" metals, and low-carbon aluminum producers are cautious about each other's methods.
More fundamentally, there is not enough demand to generate physical premiums.
The supply of low-carbon aluminum from Western consumer brands such as Apple and Tesla is relatively sufficient, mainly from aluminum smelters in Canada and Europe.
Determined by market forces, it is uncertain how long it will take for demand to grow to the extent that buyers need to pay an actual premium to ensure supply.
However, this will not be left to market forces.
"Savvy and forward-looking decision makers are considering switching to government procurement methods to focus on low carbon dioxide materials (and) the green boundary," Jean Simard said. Simard is the head of the Aluminum Association of Canada, which provides some clues to decision makers he might consider.
But it is the European Union that has taken the lead in this regard. It has accelerated its carbon reduction strategy and penalized imports of high-carbon products as a way to prevent "carbon leakage."
Amortized price
Although the "green premium" may not yet be traded in the physical aluminum market, it has begun to form in the financial market, and the financial market expects a forward curve of carbon regulation and consumer demand.
Trafigura Trading Company just announced that with the support of Natixis and Rabobank, it will provide a low-carbon aluminum financing mechanism of up to 500 million US dollars. The interest will be a "preferential" interest rate, which makes Trafigura a low-carbon producer's product Pay a premium.
This loan may also be used for inventory financing. Aluminum is a metal that has historically held high inventories, and its funding comes from the forward curve of the London Metal Exchange.
Such transactions may only last a few months, or they may be completed within a few years. In this case, financiers are now facing a dilemma.
The analysts explained that in these low-carbon transactions, their peers have consciously conducted low-carbon transactions during the two-year low-carbon transactions. ("Metal Weekly", September 8, 2020).
Citigroup stated that as carbon emissions rapidly rise to the agenda of institutional investors, “over time, Western banks may become more restricted in financing high-carbon materials”.
This difference in stock financing requirements will be available for trading on the spot platform launched by the London Metal Exchange next year. This initiative complements the voluntary report on the environmental footprint of metals.
In the fast-growing aluminum market, this is a simple way to deal with the "standards" of complex competition. It is hoped that over time, the market itself will standardize the premium for low-carbon metals.
However, as different regions advance at different speeds on the road to carbon emission reduction, it seems unlikely that a single global "green premium" will appear, but a series of regional low-carbon premiums will be traded simultaneously with the existing traditional regional premiums.
