Producers of “green” aluminum – made using renewable energy rather than fossil fuels – are starting to charge premium prices thanks to rising demand from industrial customers under pressure to reduce their carbon footprints.
Operators of smelters powered by hydro-electricity in the likes of Norway, Russia and Canada are promoting their environmental credentials – and stealing a march on others that rely on coal or gas, notably in China and the Gulf.
The competitive edge lies not in the metal itself, but the fact that its production requires far lower total emissions of greenhouse gases including carbon dioxide.
While they do not use the term “green” aluminum, a number of producers are offering low-carbon guarantees on their metal, although they refuse to say how much more they charge for this beyond saying the premiums are relatively modest.
Those with access to large hydro-power capacity such as Norway’s Norsk Hydro (NHY.OL), U.S.-based Alcoa (AA.N), Russia’s Rusal (0486.HK) and London-listed Rio Tinto (RIO.L) believe the tide is turning in their favor.
Nearly 200 countries have agreed to set targets for limiting CO2 emissions under the Paris climate accord on curbing global warming, although President Donald Trump has decided to pull the United States out of the pact.
This is boosting demand for “green” aluminum particularly from the motor, electronics and packaging industries which need to produce lower carbon goods to satisfy regulators, investors and consumers.
The pressure to make low carbon metal is increasing from all sides, said Kathrine Fog, a senior vice president at Norsk Hydro. “We’ve seen this coming from the market, our customers, shareholders, financial markets, NGOs, you name it,” she added. “That means in the end it will affect the bottom line.”
Making aluminum from bauxite ore requires massive amounts of electricity, so a plant’s energy source is the biggest contributor to its overall greenhouse gas emissions rather than the smelting process itself.
Making one tonne of aluminum at plants using power generated by burning coal, the main source for those in China and Australia, releases up to 18 tonnes of CO2 equivalent.
For gas-powered plants in the Middle East, the figure is between five and eight tonnes, but for those running on hydro-power it is lower still at only around two tonnes.
Aluminum can also be recycled with even lower emissions, although global demand is such that new metal will be required for years to come.
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