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'Green' aluminium critical but producers shy, says EN+ chairman

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'Green' aluminium critical but producers shy, says EN+ chairman

London — Development of a green aluminum industry - producing metal with low or potentially even zero carbon emissions - is now "critical" to the functioning of a low carbon economy, yet some producers are still reluctant to disclose the carbon content of their production, said Gregory Barker, executive chairman of EN+, parent company of Russian aluminum producer Rusal.

Barker said that he had proposed to the LME in a recent workshop that producers should disclose the carbon content of the aluminum they trade on the exchange but had met with a "huge amount of resistance" from LME members - who considered this disruptive - although the LME itself was in favor.

The executive said on the sidelines of the event that he attributed this "push-back" to companies being resistant to change, while other sources indicated this kind of disclosure could involve extra costs, which producers may be unwilling to bear at a tricky time in the market.

The market for aluminum, with cash prices today at $1,710/mt on the LME, "is currently extremely bearish," said Jorge Vazquez, managing director of Harbor Aluminum. This follows a fall of 50% in producer prices since last year, and although a rally is foreseen within six months, prices are expected to dip again in second-quarter 2020, to average $1,720/mt next year, Vazquez said.

According to Barker, a former UK shadow environment minister, the energy-intensive aluminum sector currently accounts for 4% of all carbon emissions globally, and is one of the world's seven largest hard-to-abate sectors.

Rusal claims to be one of the pioneers in green aluminum production and miners Rio Tinto and BHP are among other producers also taking initiatives in this direction.

Barker said that there are considerable discrepancies on how much carbon is used in primary aluminum production: as much as 22 mt of carbon may be used to produce 1 mt of aluminum in Chinese smelters which derive their electrical energy from coal-fired power stations, to as little as 3.7 mt of carbon per mt of aluminum in some low-carbon producers.

Carbon-usage figures should decline as the cost of renewable energy comes down, he said.

Sources close to the LME said that the discussion about the possibility of so-called 'green' aluminum gaining premiums in exchange trading is on-going. "It's on the table," one source said, indicating advances in this area may come sooner than many expect.

James Nicholson, head of corporate responsibility at global trader Trafigura, said that conversations with clients on green aluminum are getting "far richer" as market demand grows in this respect. "It's becoming a business edge," he said.

SUSTAINABILITY COSTS

Jean-Sebastien Jacques, CEO of miner Rio Tinto, highlighted the costs of what are now viewed by the broader industry of investments in sustainability.

Investments in sustainability will always bring an impact on the cost curve and the industry is moving in one (upwards) direction in this sense, Jacques told seminar participants. Much more needs to be done and can be done by the mining industry: "the question is not if we can but how can we do it," he said. At the same time, only a profitable business can be sustainable, he said.

Safety, partnership and access to the right talents are three key priorities for mining today, Jacques continued. Partnerships are a "make or break force: if you don't gain the hearts and minds of your local government and community you will not gain the resources to work," he said. "We can't do anything in sustainability without partnership."

-- Diana Kinch, diana.kinch@spglobal.com

-- Edited by Debiprasad Nayak, debiprasad.nayak@spglobal.com