All four major companies are reorienting strategy to meet the challenge of Trump’s high tariff rate
By Kunal Bose
India, the world’s second largest aluminium maker with production in 2024 rising marginally to 4.2m tonnes from 4.16m tonnes in the previous year, is already a big producer of hydropower with large new capacity periodically getting commissioned. But for logistical reasons that renewable energy is not available to Indian smelters. Thankfully, all the four aluminium groups in the country – Vedanta, Hindalco, Nalco and Balco – continue to make large investments in wind and solar energy to be able to make low-carbon metal. The industry is to invest up to $5bn to build renewable energy capacity of up to 20 GW by 2030.
Vedanta Aluminium, the largest in Indian industry, is aiming to raise the share of renewables in total energy use from the present around 5% to 30% by 2030. The industry, as a whole, is actively engaged in exploring the possibility of using hydrogen in alumina refineries. Like in so many other areas, the Chinese industry is stealing a march in this pursuit too by making a commitment to use 30% renewable energy in aluminium smelting by 2027. Government pressure and industry self-realisation apart, the growing demand for low-carbon or green aluminium, not necessarily confined to developed countries is seeing more and more producers working to reduce their carbon footprint.
At this point, 25% of global aluminium production is considered green. Explaining the outlook for low-carbon white metal, Companhia Brasileira de Alumino (CBA) CEO Luciano Francisco Alves told Fastmarkets: “Currently, there is an available supply of green aluminium for an incipient market, concentrated mainly in the auto sector and end-consumer products, but if this market starts to demand more and other sectors start to (increase) demand, few companies will be prepared to meet this, so there may be a bigger demand for differential premiums for producers like us.” Aluminium makers set on the green journey will rightly expect to be compensated for investment in renewable energy and other related facilities such as disposal of mine tailings, bauxite residue and dry alumina residue by way of premiums.
The market experience of CBA is to be seen as representative of the industry. Alves said: “We can’t charge more for providing green aluminium right now, but we already know that we have higher sales volume because we produce low-carbon material.” The hope is as user sectors from automobile, construction and consumer products warm up to using green materials, they will pay a premium for low-carbon aluminium.
The fact also remains that as US President Donald Trump has upset normal global trade by way of weaponisation of tariffs, the fallout could not but be some shift of focus from greening of aluminium to managing aluminium surpluses that must be sold in the world market after meeting domestic demand. In the meantime, in an attempt to blunt criticism of exporting at artificially low prices, Beijing in December last did away with tax rebate subsidies of 13% on exports of aluminium products. To the extent of rewinding of export subsidy, competitiveness of Chinese aluminium in the world market will be compromised.
The debating point now is if Chinese aluminium exports have already peaked. Reuters says analysts at Macquarie Bank have forecast Chinese exports are to “fall by 8% over 2025 with any sharper collapse unlikely since the world outside of China is heavily dependent on its products to the tune of around 15% of total demand.” Principal destinations for Chinese aluminium exports are the US, Mexico, South Korea and Japan. Vietnam, Australia, India and Thailand also receive good volumes of aluminium products of China origin.
Trump’s tariff blitz is seen as an attempt to stop any further hollowing out of the US ‘rust belt’ industries such as aluminium now inviting 25% import levy and instead create condition for restart of capacity building. After over four decades of industry hibernation, Century Aluminium, backed by significant funding by the US Department of Energy will be building a large smelter, the details of capacity and location are in the process of finalisation. But what is known is that the smelter will be will be low carbon and electricity to be used will be largely from renewable sources. The US aluminium production shrank from a high of 7.48m tonnes (primary 3.78m tonnes and secondary 3.70m tonnes)in 1999 to 4.28m tonnes in 2024 in which the share of secondary was 3.60m tonnes and primary 680,000 tonnes. As a result, the US was required to import 4.8m tonnes of aluminium (crude and semi-manufactured) last year, which trump berates.
High energy bill resulting from Russian invasion of Ukraine in February 2022 and also rises in labour cost have rendered a substantial portion of European primary aluminium capacity idle. IAI data points to a steady decline of the European industry through the decade. The Western and Central European primary production fell 25.5% from 3.8m tonnes in 2010 to 2.83m tonnes in 2024. But in the corresponding period, production fall in Russia and Eastern Europe was much less at 5.57% from 4.25m tonnes to 4.16m tonnes.
The European production may be on a downslope. But, according to the environmental profile report by European Aluminium, since 1990, the carbon intensity of primary aluminium production in Europe has been reduced by more than half, positioning Europe as a global leader with one of the smallest carbon footprints—almost 60% lower than the global average and nearly one-third of the Chinese average. However, the global warming potential (GWP) of European aluminium imports has risen by 11% since 2021, driven largely by increased reliance on ingots produced with non-renewable energy sources. This stark contrast highlights the urgent need for EU policymakers to prioritise and support aluminium made in Europe with low-carbon energy. Beyond primary production, the European industry is making impressive strides in improving environmental performance of semi-finished rolled and extruded products.
Will the Chinese ‘Action Plan’ defining production discipline and export restraint be the trigger for the European industry to revive smelting capacity idled earlier? Will the US for the same reason have new capacity beyond what Century has proposed? Besides what China will hopefully do, a report prepared by CRU International for IAI says that the global aluminium industry will be required to make an additional 33.3m tonnes by 2030 to meet demand growth of almost 40% to 119.5m tonnes from 86.2m tonnes in 2020. Transportation, construction, packaging and electrical sectors will be the principal drivers of demand growth accounting for 75% of metal use.
Expectedly two-thirds of the demand growth will come from China amounting to 12.3m tonnes. The rest of Asia will need an extra 8.6m tonnes, North America 5.1m tonnes and Europe 4.8m tonnes. Together, the four regions will have a share of over 90% of the additional aluminium to be generated by 2030. Parallel to making that extra aluminium, the industry will have to “advance its sustainability credentials… and work along the vale chain to deliver more sustainable products and services to consumers,” says CRU’s aluminium head Zaid Aljanabi. To support that kind of production growth, the bauxite bearing countries such as Guinea, Australia, India and Brazil will have to open new mines along with stepping up production at the present operating sites. The world will need new alumina capacity matching the extra bauxite that will come for processing in 2030.
Among all aluminium making countries, of course excluding China, capacity expansion will be most vigorously pursued in India. All the groups have major expansion plans across the value chain to take advantage of aluminium demand CAGR (compound annual growth rate) of 7% to 9% during the period 2023-28. The demand growth will be primarily driven by transport sector, rapid urbanisation, construction and infrastructure projects. “This is as it should be, since the country owns large volumes of high-quality bauxite, mainly found in Odisha where mining, refining and smelting capacity is largely concentrated. The country can do without aluminium imports, except for some alloys for special applications. But I think parallel to the industry building new smelting capacity to cater to rising domestic demand for the metal, it should create large surplus alumina capacity for exports,” says a mines ministry official.
Vedanta Aluminium, the largest industry entity has proposed an investment of $15.42bn to build a 6m tonne refinery, a 3m tonne smelter and a 4,900 MW captive power plant, both in Odisha where it already owns a 1.8m tonne smelter and a 3.5m tonne refinery. In the meantime, the majority government owned Nalco has clarified that there is no holdup of its plan to build a 500,000-tonne brownfield smelter at the present site at Odisha’s Angul with technology from Rio Tinto Aluminium. Pitching for the latest smelting technology, the company says discussions with Rio are on the right track. The smelter to be backed by a 1,200 MW power plant “integrated with renewable energy” is set for commissioning in 2030. As for Hindalco, expansion will cover both upstream and downstream facilities. It will have a new refinery, expand smelter capacity (brownfield), make fused alumina and speciality alumina for the steel industry. In the downstream, a breakthrough project will result in production of aluminium foil for lithium-ion battery. (IPA Service)
