Aluminium. The Challenges Ahead

161 Pages·2002·9.47 MB·English

by  Nnamdi Anyadike (Auth.)

Aluminium
The challenges ahead
Nnamdi Anyadike
WOODHEAD PUBLISHING LIMITED
Cambridge England
Published by Woodhead Publishing Limited, Abington Hall, Abington
Cambridge CB1 6AH, England
www.woodhead-publishing.com
First published 2002, Woodhead Publishing Ltd
© 2002, Woodhead Publishing Ltd
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A catalogue record for this book is available from the British Library.
ISBN 1 85573 591 1
Cover design by The ColourStudio
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Printed by Victoire Press Ltd., Cambridge, England.
Executive summary
The early 1990s was a low point for the western world's primary aluminium industry. London Metal
Exchange (LME) prices hovered between $1100 and $1300 per tonne, below the cost of production
for many smelters in the developed world particularly in western Europe, and the collapse of the
Soviet Union had been accompanied by a flood of aluminium metal onto western markets and into
LME warehouses.
In March 1994 a multi-country Memorandum of Understanding (MoU) was agreed in Brussels,
which reduced global production by mothballing 1.5 m tonnes of capacity. The result was a sharp
increase in prices in the immediate aftermath, which caused real concern to consuming industries, in
particular the automotive and beverage can sectors. The damage done to aluminium's hopes of
replacing steel in key automotive body parts is hard to quantify, but the steel consortium engaged in
producing lightweight automotive steels was provided with a valuable window of opportunity in the
mid to late 1990s. In the beverage can sector, it is quite likely that some of the inroads made by PET
(polyethylene terephthalate) plastics since the late 1990s at the expense of both aluminium and steel
were as a result of the post-MoU price spike. Ironically, within a couple of years of the MoU primary
aluminium prices were back to where they were pre-MoU.
By 2001, with talk of recession in the US and Europe in the air, primary aluminium prices were
around $1500 per tonne and industrial demand was weak. However, aluminium was at last beginning
to see signs of success in the mass-produced end of the automotive market with the launch of the
Audi A2. Packaging demand was also holding up although in the beverage container market, PET
continued to make gains at the expense of the two metals.
REGIONS: DEVELOPED MARKET ECONOMIES
The Former Soviet Union (FSU)
War, or the threat of war, was the driving force behind the development of the FSU aluminium
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EXECUTIVE SUMMARY
industry for much of the twentieth century. As Hitler launched his ground attack in 1941 and
threatened to overrun much of the FSU, smelters were hurriedly planned to service the growing
military aerospace industry. Today, these smelters of the 1930s and 1940s have a combined capacity
of 646000 tonnes per year, providing the FSU with fully 18% of its primary aluminium smelting
capacity.
The cold war provided another boost because of the surge in Soviet military spending. Prior to the
collapse of the Soviet Union in 1990 virtually all of this aluminium fabricating facility was dedicated
to the military and the collapse of this sector caused major problems to the FSU's aluminium
industry. With little in the way of a mass consumer culture the prospects of a growth in domestic
Russian demand, capable of soaking up the Russian smelter output, remain slim to this day.
However, a start has been made and several possible areas of consumption, in addition to packaging,
have been identified.
Europe
One clear feature of the European aluminium industry is that the region is a net importer of primary
aluminium and if the expected growth in per capita consumption that is forecast by the European
industry does materialise in the first decade of this new millennium, then the region will rely even
more heavily on imported metal from third countries such as Russia and the Gulf Co-operation
Council (GCC) countries.
Among the European Aluminium Association (EAA) member countries, only the Norwegian
smelting industry, which receives much of its power from natural gas and hydroelectricity, is likely to
expand smelting capacity and it will remain a significant supplier of aluminium metal to the
European Union (EU). In 2001, expansions had been underway at six out of the country's seven
smelters. Norway now has just over 1 million tonnes per year of primary aluminium capacity
equivalent to some 30% of EAA production and 18% of EAA consumption.
On the demand side, overall economic growth in Europe is expected to slow down from 3.5% in 2000
to 2.6% and 2.5% in 2001 and 2002 respectively, although strong domestic demand should maintain
positive aluminium growth rates. Western Europe remains a net importer of primary aluminium,
with imports of 2 million tonnes.
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EXECUTIVE SUMMARY
North America
Canada
Canada and the USA combined represent the largest producing area of primary aluminium in the
world and also the largest consuming area. The combined 2000 primary aluminium production
installed capacity was 6.097 m tonnes, with Canada accounting for 2.4 m tonnes. With access to
reasonably cheap hydropower, Canadian smelters have some of the highest consistent levels of
operation in the world.
The USA
The US aluminium industry is the world's largest, producing some $27 bn in products and exports,
and with a capacity to produce over 4 m tonnes of primary aluminium per year. However, power
outages along the west coast in 2000 and 2001 have significantly dented primary aluminium smelter
output.
REGIONS: THE DEVELOPING MARKET ECONOMIES
Blessed with an abundance of natural gas or hydropower, the Gulf Co-operation Council (GCC)
countries, together with Iran, Mozambique and Nigeria, provide a natural site for the location of
primary aluminium smelters.
There is currently one smelter in Bahrain (500000 tonnes per year Alba) and one in Dubai (536000
tonnes per year Dubai). In Iran, there are currently three smelters: IRALCO's 120000 tonnes per
year Arak facility; the Queshm smelter, which came on stream in late 1997 and the 220000 tonnes per
year Bandar Abbas smelter which came on stream in 1998.
Africa
The key to the decision to develop Alusafs 466000 tonnes per year (tpy) Hillside primary aluminium
smelter, currently one of the largest in the western world, was access to cheap surplus electricity from
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the local Eskom power utility. Prior to the June 1996 opening of the Hillside facility in South Africa,
the biggest smelter in Africa was the 200000 tonnes per year Valco smelter located at Tema in
Ghana. Since the opening of Hillside, Mozambique's 245 000 tonnes per year Mozal smelter in
Maputo and Nigeria's 180000 tonnes per year Ikot Abasi smelter have also been built with a further
smelter in each country either agreed or mooted.
In mid-2001, only months after Mozal was inaugurated in September 2000, the Mozal partners decided
to proceed with 'Mozal 2'. Construction will start immediately, and commissioning is due in late 2003.
Meanwhile, in Nigeria, where a less successful 180000 tpy smelter has been in operation since 1997,
discussions are underway to examine the feasibility of a second smelter.
The Middle East
The Middle East has become a major player in the supply of primary aluminium to the world's
markets with new low cost plants coming on stream such as the 220000 tonnes per year Bandar
Abbas smelter in Iran. There are at present two smelters in the GCC, the 500000 tonnes per year
Alba smelter in Bahrain and the 536000 tonnes per year Dubai smelter in Dubai, and expansion
projects greatly increased their capacity in the late 1990s. In the longer term, there is a proposal for a
further substantial increase of 220000 tonnes per year at Alba. This could be realised after 2001.
India
With nine smelters India has assumed a considerable importance as a primary aluminium and semis
producer in recent years. With its large population, estimated to have hit the 1 billion mark in 2000,
and aluminium's currently low per capita consumption penetration, much of the country's
approximately lm tonnes per year production goes towards satisfying the internal market. The
country has a varied industry with an apparent surplus in virtually all segments of its aluminium
industry. But the problems associated with high power costs and the government's apparent
favouring of India's steel industry in certain key sectors, means that India's aluminium industry is
facing an uphill struggle.
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EXECUTIVE SUMMARY
China
China has made significant investment in modernising its smelting capacity and since 1995 it has
developed close links with the European non-ferrous metals industry, through Eurometaux. China
produced 2.83 m tonnes of primary aluminium in 2000, well over half a million tonnes above that
produced in 1996, and the country intends to produce some 3 m tonnes in the near future. The new
showpiece integrated aluminium enterprise, the Pingguo Aluminium Company located in the
Guangxi Zhuang autonomous region, completed first phase construction at the end of 1996. Further
phases are in the pipeline and when the whole project is completed, it will be the biggest integrated
aluminium enterprise in China and also one of the biggest in the world.
Among the areas of future aluminium demand growth are: building and construction, packaging, the
electrical industry, durable products, transportation, the mechanical industry and deox for the steel
industry. The forecast demand growth for aluminium in building and construction is an impressive
15% per year.
In the beverage can sector, China's 14 production lines, with a 3bn aluminium cans per year
capacity, are being expanded with five more lines in Beijing, Shanghai and Guangzhou now in the
pipeline.
Brazil
From a promising leap forward in per capita consumption during the boom years of the 1970s, the
prospects for the country's aluminium sector are now bleak. A pressing problem for the smelting
industry is that of rising power costs. Power rates represent the single most important threat to the
survival of the country's seven primary aluminium smelters, particularly the two largest located in the
north with a combined capacity of 704000 tonnes per year, when their power contracts end in 2005.
In mid-2001, Brazil was facing its worst ever energy crisis after a prolonged drought left hydroelectric
dams in the country's south-east and north-east at record lows. This has prompted the government to
impose an energy rationing plan that calls for large-scale consumers like the aluminium industry to
cut consumption by 25% until the end of 2001.
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EXECUTIVE SUMMARY
Oceania
The world's largest producer of bauxite and alumina and a sizeable smelter of primary aluminium,
Australia's aluminium industry is nonetheless not particularly well favoured with regards to energy.
Much of the electricity in Oceania is generated by coal - 17 203 GW, compared with 6209 GW from
hydropower and just 439 GW from natural gas.
In addition to high power costs, Australia has also been dogged by controversial land and
environmental disputes in the bauxite mining sector. There have been conflicts with Aboriginal
people at Weipa and Gove and environmental concerns have been raised about water and forests
near the mines and alumina refineries in the south-west of the country, and about the impact of the
rapid expansion of the smelters in the 1980s.
Close to 50% of Australia's primary aluminium is sold within Australia and most of the res tis sold to
Asian markets: South Korea, Thailand, China and Singapore, and despite land rights disputes and
environmental concerns, its bauxite and alumina will be highly sought after. The country has six
mines, with a total capacity of 43 m tonnes per year.
TRANSPORT
The automotive industry
There is plenty of scope for a much wider use of aluminium to replace other materials, especially
steel, and at the top end of the market there are real hopes in the aluminium industry that the metal
could significantly reduce much of the 60-70% steel that still goes into the manufacture of an average
passenger car, particularly in the car's body which accounts for 20-30% of a car's overall weight.
The best known example of an AIV (aluminium intensive vehicle) is the Alcoa/Audi A' 8' joint venture,
which in 1993 led to the production of a car with a revolutionary all-aluminium space-frame and body.
The Audi/Alcoa project has been remarkably successful in achieving its main aim of producing a
revolutionary lightweight luxury car. The car body is 40% lighter than a classical steel body frame.
In North America, already the biggest automotive market for aluminium, industry executives talk of
the need to go further and challenge steel directly in the automotive rolled products sector. Until
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now, the growth of aluminium has come primarily at the expense of cast iron and copper in the areas
of heat exchangers, transmissions, engine blocks and cylinder heads. Future growth will have to come
through taking rolled products market share away from steel. But in order for aluminium to be
successful in winning market share away from steel it will need to prove its robustness in the
manufacturing process and durability. Greater scientific and technical understanding will also be
needed about the moulding of aluminium.
The use of aluminium in engines is already quite extensive and virtually all new engine developments,
whether petrol or diesel, now have aluminium heads and in the case of petrol engines, the blocks are
now made out of aluminium as well.
The other major application for aluminium alloys is wheels, partly to meet the need for weight
reduction and partly to meet the demands of fashion. Hydroalu is supplying wheels to BMW as are a
number of other aluminium producers. Indeed, many automobile manufacturers either fit aluminium
wheels as standard, or offer them as optional extras. By comparison with steel wheels, aluminium
alloy wheels can offer weight savings of up to 25 lb per vehicle.
Other automotive developments that are expected to have beneficial effects on aluminium demand
include the Electric Light Vehicle (ELV) and the hybrid vehicle. Research into fuel cell technology is
advancing rapidly and heralds the possibility of vehicles being powered by fuel cells (a device which
turns liquid fuel into electricity without the need for combustion) appearing by 2010-2015.
The aerospace industry
When the new Airbus A380 takes to the skies in 2006, it will have a maximum take-off weight of
approximately 530 tonnes, of which 140 tonnes will consist of aluminium alloys. This does not take
into account the aircraft's four engines, where incremental amounts of aluminium may be used. This
will make the Airbus A3 80 a very substantial user of aluminium, which will provide 68% of the
material weight of the airframe.
But while the combined 140 tonnes of aluminium used per A380 aircraft is impressive, in fact a much
larger quantity of aluminium will be used per aircraft, due to the very high buy-to-fly ratio. This is
because in the manufacture of the thick aluminium plates, substantial quantities of aluminium are
machined away. Johannes Koshorst, Manager of Advanced Structures and Materials at Airbus
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Industrie, estimates that using current Airbus design principles, about 980 tonnes of semi-finished
aluminium products will be needed per aircraft, providing a buy-to-fly ratio of 7:1.
Public and commercial transport: road, rail and fast sea craft
A new market for aluminium alloys in the transport sector is the development of high speed vessels,
such as those used on the Ramsgate-Ostend route, to replace the older generation of car ferries.
These ferries, with speeds of up to 40 knots, each consume over 800 tonnes of aluminium in the form
of extrusions, sheet and plate. About 10 of these vessels are currently being produced per year, but
forecasts show a growth potential to over 40 per year in the early years of this millennium.
It is estimated that aluminium applications in industrial vehicles grew by 4—5% in the five years to
2000. However, over the next five years, aluminium applications in this sector could increase
worldwide by 30-50%.
PACKAGING
Growth in aluminium consumption in packaging, in terms of tonnage, has averaged 3.8% for the
past 20 years in Europe, the US and Japan. But because of developments in rolling technology, which
has reduced the thickness levels significantly, the growth of aluminium consumption in terms of
surface area is even greater at around 5%.
While aluminium has achieved its highest level of penetration in the US market, particularly in
beverage can applications where it has a virtual 100% share of the market, in Europe per capita
consumption is also growing, albeit belatedly.
Among the growth markets targeted in Europe are the flexible food and drinks packaging sectors.
During the last 25 years, the production of aluminium foil has grown by 4% per year, even though
thickness levels have been reduced from 200 micron to 6 micron.
Figures published by the European Aluminium Foil Association (EAFA) show that growth in
demand for aluminium foil continued strongly in 2000. The total deliveries from EAFA roller
members went up to 682000 tonnes. Further growth is expected in 2001 and beyond.
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