Global Aluminium Market Wins Business as it Emerges as Sustainable Solution to End Users
Aluminium is the second most-consumed metal after steel and is considered a ‘strategic resource’ having a decisive impact on national economic, military, transport, and energy needs. Aluminium has gained popularity as an alternative to steel, zinc, copper in a wide range of industries owing to its unique characteristics such as lightweight, corrosion-resistant, highly reflective, excellent strength-to-weight ratio, an excellent conductor of electricity and heat. It also offers design freedom and flexibility, thus allowing to form virtually infinite new shapes. Aluminium is one of the most sustainable and energy-efficient construction materials used across the industry. Reusing and recycling offer potential environmental savings even after the demolition of building structures.
Around 3/4th of aluminium ever produced is still in use today, as the material is indefinitely recyclable and durable. Recycling aluminium lower production costs, lesser energy usage, and allows greater sustainability. Aluminium can be deployed in a range of applications from railway tracks through aircraft components, construction materials, transmission lines, packaging foils & cans, pyrotechnics, kitchen utensils & containers, paints, etc.
Huge Demand for Flat-rolled, Cast Products in the Automotive and Aerospace Industry
Aluminium semis are generally made available in extruded, rolled products, castings, powder, pigments, and cable forms. Extruded and rolled products accounted for more than 60% of the total aluminium market in 2019. Aluminium flat-rolled products play an important role in the automotive industry. It is a material of choice to answer major challenges in the automotive industry, especially regarding light-weighting, CO2 emissions, and fuel efficiency. Flat-rolled products are used in automotive body structure, interior & exterior panels, and as heat exchanger material. Aluminium castings are used for engine parts and transmissions. Globally, the use of aluminium in automotive is anticipated to get doubled to around 25 % of consumption (30 million tons) by 2025.
Furthermore, electric vehicles are anticipated to boost aluminium demand exponentially over the next couple of decades. Globally, EV production is estimated to reach more than 26 million units by end of 2030. Along with EV body structures, aluminium can be used in EV infrastructure components such as EV charging stations. EV weight and the energy requirement (Wh/kg) have a direct relationship, thus usage of aluminium alloys in body structure is also expected to improve upon the EV’s driving range and overall vehicle performance.
80% of the framework of today’s modern commercial aircraft is aluminium. In the aerospace industry, aluminium is widely deployed in structural applications such as fuselage and wing skins, stiffeners, window and mainframes, floor structure, seat tracks, doors, and doublers. Over time, the aerospace industry has become extremely demanding in terms of materials used. The introduction of wide-body aircraft and long-haul international flights lengths requires shell and engine parts to have exceptional resilience and excellent resistance to fatigue. In the past few years, manufacturers are coming up with unique alloys such as aluminium-lithium alloys which offer better fuel efficiency and lower maintenance costs as compared to other materials in the sector.
Building and Construction to Hold the Keys to Success in the Aluminium Market
With time, aluminium has gained popularity in high-rise buildings as well as civil engineering projects. Along with basic building structures, aluminium products are also used in interior as well as exterior applications. From domed roofs through window and door frames, HVAC systems, furniture, decorative ornaments, etc. The building and construction industry is one of the largest end-users in the aluminium market and accounted for more than 1/5th of the total demand in 2019. There is a shift towards green construction and aluminium perfectly encourages the green building revolution. Aluminium profiles, extrusions, fabrications, and castings play a critical role in lowering the carbon footprint since aluminium is easily recyclable and more sustainable compared to other building materials. Around 9 tons of CO2 emissions and 4 tons of bauxite (key raw material for aluminium) are saved by recycling a ton of aluminium.
In the past few years, the packaging industry has shifted towards identifying sustainable alternatives to materials such as plastics. Aluminium is touted as a key solution, stamping its authority for the circular and sustainable economy. It has higher recycling rates worldwide as compared to plastics. Aluminium packaging products offer a barrier to light, moisture, oxygen, and is antibacterial, making it a preferred material in food, personal care, and pharmaceutical packaging. In the light of the change in consumer preferences and growing pressure for sustainable packaging solutions, companies are shifting towards aluminium foils and cans. In 2021, Nature’s Baby Organics, a U.S. based personal care company, shifted from plastics to aluminium for packaging personal care and bath products. The move was taken to its commitment to eco-friendly and sustainable packaging solutions in the industry.
Construction and Automotive Industries in Asia Pacific Put Aluminium Market in Overdrive
The aluminium market has become polarised with a strong divergence between the economic recovery in China versus other nations. China is the world’s largest consumer and producer of aluminium. In the past few years, prices have remained low due to a supply glut allowing smelters to record robust margins. While this has galvanised capacity expansions in the aluminium market, they are largely concentrated in China. In 2019, China consumed an estimated 34 million tons of aluminium. Growing demand from the automotive and aerospace industry for lightweight materials coupled with well-regulated carbon emissions standards in the industry is anticipated to boost the demand for aluminium in China.
India is anticipated to record exceptional market growth. Strong demand from the construction industry is well supported by a significant infrastructure deficit in India coupled with strong government support to the residential construction sector. This is anticipated to lift the overall demand for aluminium in the country. Furthermore, the government support for lightweight and energy-efficient materials in the automotive sector is also a boon for the aluminium market in India.
In Europe, aluminium is considered as a huge potential prospect to achieve the EU’s climate-neutral and circular economy goal. There is a huge demand for recycled aluminium from a wide range of industries including automotive, aerospace, electronics, and packaging, thus making Europe’s aluminium industry cost-competitive and energy-efficient. New legislation that could reshape the aluminium market in Europe is Carbon Border Adjustment Mechanism (CBAM). Marginal aluminium importers with a carbon footprint above the European Commission threshold will be charged a carbon tax as per the emission level of that product. It remains to be seen how this carbon tax will affect the price mechanism in the aluminium market.
Inorganic Growth and Technological Investments Characterize Overall Competition
Recyclability and sustainability are at the forefront of gaining a competitive advantage in the aluminium market. Manufacturers are prioritizing new product development and strategic collaborations to strengthen their foothold in the aluminium market. Companies such as Alcoa Corporation, Rio Tinto Alcan Inc., Hindalco Industries, Aluminium Corporation of China Limited (CHALCO), Norsk Hydro ASA, Global Aluminum PJSC, and China Hongqiao Group Ltd. have integrated aluminium businesses.
In 2020, Novelis – a subsidiary of Indian giant Hindalco Industries – announced its acquisition of Aleris Corporation, a supplier of rolled aluminium products. Through this acquisition, Novelis has strengthened its competitive position by integrating its recycling, casting, finishing, and rolling capabilities allowing Novelis to cater to high-end demand in the aluminium market.
In 2020, United Company RUSAL stated that Krasnoyarsk Aluminium Smelter (KrAZ) has transitioned to EcoSorderberg technology. UC RUSAL had invested approx. US$ 74 million for 1954 reduction cells that were developed by the company’s in-house engineering and technology centre.
June 2021, the Xinfa Group signed two binding offtake agreements with Australia’s Metro Mining Ltd. to deliver one million dry metric tons (DMT) of bauxite at a fixed price basis. The contract period is from April – September 2022. Metro Mining has promised to deliver two million DMT annually to the Xinfa Group for the next three years. The two companies already have a well-established business relationship as Xinfa was one of Metro Mining’s initial customers when Bauxite Hills began operations.