Primary aluminium needs are set to swell

It’s an uncertain time for aluminium, one of the products that has felt the impact of US President Donald Trump’s tariffs. However, according to world macro models and analyst expectations, aluminium is anticipated to trade at $1887.02/tonne by the end of this quarter. And a year from now, online information provider Trading Economics expects it to trade at $1785.92/tonne. In a webinar, International Aluminium Institute (IAI) deputy secretary general Chris Bayliss noted that primary aluminium production was 63m tonnes in 2018 and 64m tonnes in 2017 to meet aluminium demand for semi-fabricated products. Semi-fabricated product demand in 2017 was 95m tonnes. Additionally, recycled aluminium constituted 31m tonnes in 2017.

“Today, around a third of aluminium demand is met through recycling and around two-thirds from primary aluminium production, and that recycled component is about 50:50 old and new scrap, so post-consumer or pre-consumer scrap,” he said. “That means there’s a huge generation of waste material: the bauxite residue generated in 2017 is 160m tonnes of bauxite residue, so the largest waste stream we have.”

Rising demand

Under a baseline scenario for 2030 from the IAI, 90m tonnes of primary aluminium will be needed at that point in time. Demand for semi-fabricated products will be 140m tonnes, and recycled aluminium will sit at 50m tonnes.

“Demand for those semi-fabricated products is going to increase by around 50%,” Mr Bayliss said. “The recycled aluminium that will come through the process is limited, because these long lifetimes of products mean that then the material doesn’t come out of the use phase. It stays in use for a long time. … Now if we increased recovery of scrap to 100% — across the board, everywhere in the world, all products, 100% recovery of recycled aluminium — that 50m tonnes would increase to 60m tonnes. So it would increase, but it wouldn’t meet the 140m-tonne demand. There would still be a gap. Long lifetimes of products mean that the material is still in use.”

Discussing the primary aluminium requirement ramp-up under the 2030 baseline scenario, Mr Bayliss noted the negatives resulting from this development.

“[The next 11 years constitute] a very short timescale in which to put that extra capacity and that extra production in place, and it also brings with it some increased risks and challenges,” he says. “The bauxite required to meet that demand would have to increase from around 300m tonnes today to half a billion tonnes of bauxite every year. It’s likely to be met by areas such as Guinea in West Africa — certainly, there’s a lot of investment in Guinea at the moment in mining bauxite extraction.

“It brings with it its own risks in terms of security of supply and in terms of environmental and geopolitical risk as well. So there’s certainly some uncertainties there as we look out to 2030 in terms of raw material supply. We’ll continue to see Australia meet a fair old chunk of that demand. Brazil will continue to produce. You’ll see some new areas also opening up to meet that demand. But new areas of production bring with them new risks and new challenges as well. Bauxite residue-generation will increase to 300m tonnes.”

Key takeaways

Mr Bayliss offered a number of conclusions. The IAI’s 2030 baseline scenario suggests around a 50% boost in demand for aluminium and heightening recycling rates only offer a limited potential because of the long life of products and because long-lifetime products already have very-high recycling or collection rates. This means that at least until the middle of this century, primary aluminium will keep meeting the bulk of metal demand, and if end-of-life recycling is maximised, the 90m tonnes of primary aluminium needed in the next 11 or 12 years will go down to 80m tonnes.

“With that growth comes risks in raw material-supply and waste management: 1bn tonnes of bauxite residue every three years by 2030, half a billion tonnes of bauxite required from areas with potential political, socioeconomic and environmental risk,” explained Mr Bayliss.

While the location of new primary capacity is uncertain, it will likely be from fossil fuel-intensive areas. Additionally, some firms are already marketing “‘low-impact’” aluminium in response to demands from customers. However, Mr Bayliss noted that the 90m-tonne demand remains.

“That 90m tonnes demand still stays there in 2030, even if some customers are asking for low-impact. The big driver is that 90m tonnes primary demand by 2030, although at the moment, it’s increasingly coal-fired,” he said.

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