An interview with Anton Bazulev, responsible for international projects of UC RUSAL, on the strategies of the Russian giant on major global issues such as: environment and climate change, low carbon primary production, the ALLOW – Low CO2 Aluminium- brand, sustainability of growth in final uses, innovation and new products and technologies.
di Mario Conserva
The world aluminium industry is facing extraordinary challenges, the new energy and resource-efficiency requirements in the development of transport, electronics, building, construction and other industries are the main drivers of light metal demand, but some issues must be seriously considered, such as, the environment and climate change, population growth and urbanization, innovations and new products and technologies. We discussed the possible strategies for the world’s light metal industry, faced with these important challenges, with Anton Bazulev, Head of International Projects of UC RUSAL.
Let us start with the themes linked to environmental issues and excess capacity. The situation seems to be very similar to the one which impaired the development of the steel industry, characterized by major unbalances caused by excess capacity and overproduction on a global scale. In our industry, capacity expansion in China resulted in smelters’ closures and direct and indirect job losses in local communities across many countries. As an example, in the 2008-2016 period, aluminium production in Western Europe decreased by 18%, in North America by 30%, in South America by 50%, in Russia by 12%. The issue is very serious, suffice it to think about the measures announced by the Chinese government to offset with production cuts both the marked excess in production capacity for the light metal and the energy waste and environmental pollution. What is your opinion in this respect?
The theme you are introducing is of the utmost importance for the role and the sustainable development of the light metal on a global level in our planet. Aluminium is the second most consumed metal globally after steel. Global primary aluminium demand is expected to grow by another 13.5 mln t over next 5 years (Figure 1), but it is also a fact that the environment is a major issue for the people and the planet, which means that there should be more emphasis on environmental factors in ramping-up aluminium production. This is not only to mitigate long-term climate change, but also to improve health prospects for millions of people. Aluminium is a material with a number of advantages in terms of its reuse and recyclability, with a positive impact on energy saving in transport, construction, machinery and electronics and other industries and the world’s annual aluminium demand is growing at the very high rate of 5.8% (Figure 2). In spite of all of this, the aluminium industry is facing challenges very similar to those that have impaired the development of the steel industry some time ago. In the last 20 years in certain countries, direct and indirect state subsidies, lax work-place safety and environment regulation and financial stimuli distorted market self-adjustment mechanisms, causing a glut on the aluminium market. The issue has reached global dimensions as cheap imports start to displace production in some countries and provoke protectionist responses in international trade. However, trade barriers are far from being an adequate regulatory mechanism for global economy. They not only harm exporting producers but are of very little use for the revival of the domestic industry in the country of import while stalling the growth of downstream industries which experience short supply and price hikes.
The situation was clearly demonstrated by the steel crisis of the 1990s when inflow of steel to North America and Europe prompted wide range of trade responses that resulted in massive harm to consumers but didn’t stop the domestic industry’s decline. Only rapid growth of demand in China in the early 2000s allowed to temporarily improve the global steel market. But then economic crisis and overproduction reverted the situation. Recognizing this, the G20 leaders at the Hangzhou summit in 2016 decided to address market imbalances in the steel industry by creating a new type of mechanism which, instead of fighting the consequence by raising tariffs, would address the cause of the problem – the government subsidies and regulatory practices. Since then, the Global Steel Forum’s discussions and some progress made there by the end of 2017 reinforce my opinion that our industry needs a similar dialogue to tackle excess capacities and avoid trade wars. That would benefit the entire industry and the countries with excess capacity in particular.
Regarding the Chinese issue, according to official publications of the European Commission, since the early 2000s, and particularly in the last decade, the Chinese aluminium industry has experienced massive growth, both in alumina and primary aluminium production. In the past few years, China has accounted for the vast majority of the production capacity increase in the aluminium sector worldwide. What can you say about this point?
For the last decade the world’s aluminium industry has worried about China’s rapid capacity growth which was not always justified by underlying demand and exactly followed the patterns of the Chinese steel industry’s expansion a decade ago. But time is running faster on the global clock and after the 2008 crisis we have different topics on the global industrial agenda: energy efficiency, resource economy, clean technologies and digitalization. While old-style expansion of capital-intensive, environmentally unsafe and subsidized industry becomes a source of product glut, environmental crises, job loss and credit crunches. There is no doubt that all those factors were drivers of a policy change by Chinese leadership, now determined to tackle the excess capacity issue in steel, aluminium and other sectors. This includes companies’ deleveraging and stricter environment controls. While practical outcomes of China’s new economic priorities are yet to be seen, there are clear signals that the Chinese leadership appreciates the benefits of a global industrial dialogue as opposed to escalating protectionism. It is worth noting that China has been actively involved in the Global Steel Forum since its historic creation by the decision of the G20 summit in Hangzhou in 2016 and supported its work in the Hamburg summit declaration in 2017.
The “realpolitik” of China’s stance creates a favourable backdrop for advancing the Global Aluminium Forum initiative at the B20 and G20 process, which has restarted with the transition of the G20 presidency from Germany to Argentina.
In your opinion, should the uses of the metal be somehow rationalized so as to aim at the utmost sustainability? What about metal recycling?
No doubt that recycling is a good solution for a low CO2 aluminium value chain; the complete recyclability of the light metal without any appreciable loss in performance over the whole life cycle is known to be one of its main properties. It should however be considered that the aluminium demand is growing but availability of recycling materials is limited. More than 75% of the worldwide aluminium annual demand needs to be met by primary metal, which accounts for the largest share of impact in terms of carbon footprint of the entire aluminium supply chain.
But it is also important to look upstream at the production of primary aluminium; electrolytic production requires a lot of electricity (on average 12 to 15 kWh/kg of metal). In the past 20 years, most of the capacity growth has been due to smelters powered by coal and fossil fuel energy. Coal based smelters generate 4 to 5 times more GHG emissions than hydro power based ones, carbon emissions from the burning of fossil fuels create huge societal costs which are masked in public health care, harm to the environment, and the effects of climate change (Figure 4). This means that not all primary aluminium is equal, today the worldwide production of primary aluminium adds up to over 60 million tons of CO2 a year, of these almost two thirds derive from plants using fossil fuels electricity. Today it is clear that, depending on the upstream choices, the sustainability of capacity expansions is very different. We believe the world cannot afford an increase in coal-powered production facilities. On the other hand, as I mentioned before, many large end-users of light metal have for some time now provided and requested specifically aluminium produced using low-carbon solutions, that is, exactly, the hydro power.
Are there any connections between the production capacity of primary metal and environmentally sustainable production?
While sustainable market-driven development of energy intensive industries like aluminium based on renewable energy sources contributes to GHG emission reduction across the world, it is obvious that excess capacities are based largely on coal fired power generation. From a financial standpoint this becomes possible either when environmental standards are neglected or if subsidies are granted to overcome associated costs. Implementing stricter environmental regulation and adjusting input prices by lifting subsidies for resource and environmental costs will level the playing field and force the most inefficient and polluting companies to exit the market. I remember, for instance, that in response to the unsustainable expansion of production capacity coupled with growing environmental concerns, the Chinese government announced measures, including standards for energy consumption and greenhouse gas emissions. Nevertheless, so far by all estimates, the aluminium smelting capacity in China will continue to grow, but in a more sustainable way now, as one can expect.
During the last Metef show in Verona, A&L magazine published a brief interview with Jerome Lucaes, Director, Marketing and Sustainability, UC RUSAL, who, regarding your company’s commitment as concerns the future of aluminium with respect to environmental sustainability aspects, stated that the global aluminium demand will only achieve its full potential if the metal production will grow in a way
that is acceptable for the planet and society. He ended by stating that for your company environmental commitment is a very important basic issue, and that RUSAL is really playing an important role in this plan, being the largest producer of low CO2 metal, producing over 3.9 million tons of aluminium, with 95% of the electricity used by its smelters being produced from carbon-free energy sources, mainly hydroelectricity. Since then, RUSAL reaffirmed with determination its vision on this theme, by launching ALLOW, Low CO2 Aluminium, that is aluminium crafted by hydropower. What can you tell us about his new RUSAL proposal?
Being one of the top aluminium producers, UC RUSAL closely oversees any shifts in consumers’ preferences. Namely, we observe a growing demand for products with low carbon footprint, which additionally stimulates us to introduce new clean technologies further lowering carbon inputs throughout the value chain from power generation down to the finished product. In 2017, RUSAL presented its own brand of low-carbon aluminium ALLOW. Primary aluminium produced under ALLOW brand is aluminium with low-carbon footprint with less than 4 tonnes of CO2-equivalent per tonne of aluminium (scope 1 and 2 at the smelter). Moreover, ALLOW aluminium has a certifying document which attests that the product is produced with minimal CO2emissions (industry’s average rate is 12-15 tonnes of CO2-equiv. per 1 tonne of aluminium).
ALLOW takes advantage of RUSAL’s access to renewable energy that reduces the environmental cost of our customers’ downstream production. It highlights the role of cross-border value chains in the decarbonisation of Europe’s economy. Such value chains benefit only from fair and liberalized trade.
We talked at length about RUSAL’s position regarding the environmental safeguard aspects and the sustainability of the production of primary metal; your company is also looking with great interest at research and innovation in the aluminium industry, from metallurgy to new alloys, from technologies and processes to final applications. In which main aspects is the company engaged in this respect?
UC RUSAL heavily invests in new production technologies and new products to streamline production, reduce costs and lower the Company’s environmental impact. Among its key projects are the commissioning of new super-powerful RA-550 pots (whose environmental and energy performance are unprecedented for this type of cells) and inert anode technology at our Siberian smelters; introduction of new high-value-added aluminium products to meet customer demand; application of new ore processing technology.
Also linked to the innovation theme is a project to extend partnership between Italian and Russian aluminium, a Russian-Italian Aluminium Forum, to be held within the framework of the next industrial events in Russia to exchange the experiences between the Russian and Italian aluminium systems, two industries which are highly valuable for aluminium and show opportunities for intense integration. This is an initiative with great strategic relevance promoted by the Russian Aluminium Association, Metef, A&L Magazine, Face (Federation of aluminium consumers in Europe), with the support of RUSAL. You are one of the promoters of the project, what can you tell us about it?
Currently, the Russian aluminium industry is growing and there is no representative international forum in Russia which would focus on developing high-tech aluminium industry in our country with the participation of leading world experts. The Russian Aluminium Association is actively discussing the format and other aspects of such a forum with our European partners, including Metef and Face.
Italy has a vast experience in building a world leading aluminium downstream industry and thus given the positive dynamics of the Italian-Russian trade and economic ties, a Russian-Italian Aluminium Forum could become an important instrument to boost bilateral industrial cooperation. The idea is to invite Italian companies representing different aluminium production and application areas to share their experience and establish business contacts with the Russian industry. The concept and draft agenda are expected to be presented in the near future, hopefully by February 2018. The Forum will be a very important and timely event, and will require serious efforts on all sides. ❚