supplements aluminium - metal bulletin...case study).” • “the ability of the sector to attract...

See you at ALUMINIUM 2012from October 9 to 11, 2012 in Düsseldorf Hall 9 / booth G30

TRIMET – Aluminium lightens your life

To scan the QR code and receive more information about TRIMET ALUMINIUM AG, you need a camera cell phone and a code reader app such as barcoo. You can receive this for free in your app store. Or simply have a look on the Internet: www.trimet.de

Aluminium www.metalbulletin.com

supplements

MEET THE EXPERTS SHARE THE KNOWLEDGE

REGISTERFOR THE 16TH ARABAL AT

WWW.ARABAL.COM

• “What would the Aluminum Industry Policy in China be for 2012-2013.”

• “Global Aluminum Industry Smelting Cost Curve Analysis 2012-2013: Winners and Losers?”

• “Automobiles Industry outlook in economic slowdown zones.”

• “A friendly environment, leading the way to efficient, low-carbon energy.”

• “The Outlook for Carbon products in the GCC Aluminum Industry 2012-2013 (supply, demand, and price).”

• “Making the industry a safer playground strengthen the Safety Standards.”

• “Aluminium Recycling.”

• “Future Prospects of Aluminum Industry in the GCC, of the rapid

regional and international changes & future plans of each smelter.”

• “The Future prospects of expanding local use and creating local demand through the development and

expansion of the use of aluminum products. (Downstream case study).”

• “The ability of the sector to attract capital, investments and aluminum related industries in the coming period.”

• “Future technology (live broadcast of the most important technologies currently in use or under development for

future use within the aluminum industry).”

• “The Arab Spring – Impact on economic growth and infrastructure

investments.”

AGENDA TOPICS

Sponsors

THE ��TH ARABALARAB INTERNATIONAL ALUMINIUM CONFERENCE�� NOVEMBER �� GRAND HYATT DOHA, DOHA, QATAR

Email : [email protected] • Hotline Number: +974 3360 2526 / 3360 2520

Aluminium

supplements

Whether in a casting, extrusion, plate, sheet or foil, the physical advantages of aluminium and its alloys are a constant for many applications. The modern world as formed simply could not function without them.

So all the while global demand for more public and private transport, residential and commercial accommodation, expanding infrastructure development, food and beverage packaging, plus a diverse array of domestic appliances and mobile electronic gadgets, continues to climb, the outlook for aluminium appears rosy. An ever increasing human population implies that growth is more or less guaranteed, so a first-time observer of aluminium markets might reasonably be perplexed that a significant proportion of the industry is actually facing troubled times.

More seasoned aluminium market watchers can readily explain that broader economics, politics and the interaction between them are the causes. As one leading base metal analyst told Metal Bulletin Focus for this supplement, the aluminium market is one of the most complex and confused of the base metal markets at present in terms of the relationship between fundamental dynamics and price performance.

Factors to throw into the mix of drivers are: the rising costs of energy in some of the historical locations for aluminium production; a surfeit of metal production which, owing to current global economics, including very low interest rates, still finds a ready market for finance deals regardless of physical demand; high levels of inventory; and very high physical premiums which – for now at least – are shielding some of the smelters with high production costs that exceed depressed aluminium base prices from the normal fundamentals of supply and demand.

National and regional government policies overshadow all of these factors of course. And as China accounts for over 40% of global primary aluminium production now, no country’s policies interest the aluminium world more. The opening article of this supplement summarises these factors and canvasses expert opinions on their impact for aluminium’s future prospects. Tougher times encourage the development of existing and new primary production technologies – the topic of the article that follows it – to lower production costs and improve efficiencies.

Many of the factors affecting primary aluminium smelting are naturally shared by the major division of the industry making flat rolled products – the subject of another section, which also considers some other trends that are specific to it.

We also look at progress for the aluminium industry in one of the most promising future markets for the industry, India, and at both the opportunities and challenges it faces there.

Lastly we highlight some of the latest innovative aluminium product developments, as the downstream sectors of the industry look to increase their share of existing markets and push out into new ones. While some troubled aluminium operations will probably be squeezed out of the physical production of aluminium by lower-cost – and some would complain sometimes subsidised – producers, those operating at the lowest end of the global cost curve still have every reason to maintain the long-term optimism about demand for their product that first-time observers of the industry would expect.

No longer simple

Published by the Metals, Minerals and Mining division of Metal Bulletin Ltd.Metal Bulletin Ltd, Nestor House, Playhouse Yard, London EC4V 5EX. UK registration number: 00142215. Editorial headquarters: 5-7 Ireland Yard, London EC4V 5EX. Tel: +44 20 7827 9977. Fax: +44 20 7928 6892 and +44 20 7827 6495. E-mail: [email protected] Website: http://www.metalbulletin.comMetal Bulletin Focus: Editor, Richard Barrett; Associate Editor, Steve Karpel. Tel: +44 (0)20 7827 9977Magazine design: Paul Rackstraw Publisher: Spencer WicksManaging Director: Raju DaswaniCustomer Services Department: Tel +44 (0)20 7779 7390Advertising: Tel: +44 20 7827 5220 Fax: +44 20 7827 5206.E-mail: [email protected] Sales Director: Mary ConnorsSales Team: Julius Pike, Abdul Zaidi, Susan ZouUSA Editorial & Sales: Metal Bulletin, 225 Park Avenue South, 8th Floor, New York, NY 10003.Tel: +1 (212) 213 6202.Toll free number: 1-800-METAL-25. Editorial Fax: +1 (212) 213 6617.Sales Fax: +1 (212) 213 6273.Subscription EnquiriesSales Tel: +44 (0)20 7779 7999Sales Fax: +44 (0)20 7246 5200Sales E-mail: [email protected] Bulletin Ltd is part of Euromoney InstitutionalInvestor PLC: Nestor House, Playhouse Yard, London EC4V 5EXPrinted by The Magazine Printing Company plc, Enfield EN3 7NT, UK© Metal Bulletin Limited, 2012

September 2012 | Aluminium | 3

CONTENTSCalling a messy primary aluminium marketWhere next for a complex global aluminium market? 6

Smelting’s new eraNew and improved technologies for maximising primary production efficiency 11

Seeking higher groundFlat rolled product makers are poised to exploit any market upturn 15

Mining delays hamper progress in IndiaPotential aplenty, but slow production growth in India 21

Innovation opens up new marketsFinding new applications for aluminium and its alloys 25

www.sms-meer.com

Smoothly supplying, erecting and commis-sioning complex plants is our business. But as a fl exible partner we can also satisfy unusual wishes: For our customer Shandong Yankuang Light Alloy Company in China, we erected one of the world’s most powerful aluminium extrusion pres-ses in our works because they wanted to see for themselves the capabilities of the gigantic machine in advance. That is what we mean by customer orientation.

Quality unites – a fact that our customers and we discover time and again with every new project. Together we develop solutions that give our partners the com-petitive edge in their business. Thanks to this good cooperation, SMS Meer is a leading international company in heavy machinery and plant engineering.

Hall 9, Booth C20 09. - 11.10.2012

Meet us at

BILLETDIAMETER

PRESSFORCE

SATISFIEDCUSTOMER

800 mm150 MN

1

Yankuang_Alu_Supplement.indd 1 05.09.12 10:43

Overview

6 | Aluminium | September 2012

Aluminium

If any reminder were needed of the importance of China to world refined aluminium production, even the briefest glance at statistics for global production and consumption readily provides it. The nation produced more than 18 million tonnes last year – over 40% of the world total – according to WBMS data. It also accounted for about 42% of consumption. By contrast, Russia and Canada, the second and third largest producers, refined 16% of world primary production between them in 2011 (see tables).

Global output last year was 7.5% higher than in 2010 and, despite falling LME aluminium prices this year, production in the first half of 2012 was still over 3% greater than for the equivalent period in 2011. China’s output climbed to a record rate of production

during the first half of this year. It was up by almost 10% over the figure for January-June 2011 – at 800,000 tonnes more for the comparable period, roughly equivalent to Iceland’s entire 2011 production.

Total world consumption is lagging production, but while European demand in the first half of this year was lower than for the first half of 2011, Asia’s and the Americas’ has climbed. China’s consumption in that comparison period grew by 1 million tonnes according to the WBMS data – actually notably more than its production increase for the comparable periods.

Stocks on exchange remain high. Metal in LME-approved warehouses has stayed above 4.5 million tonnes for the past 12 months (see graph). Much of it remains locked up in financial deals, however, and with availability constrained, physical premiums have soared.

“The aluminium market is one of the most complex and confused of the base metal markets at present in terms of the relationship between fundamental dynamics and price performance,” observes Nicholas Snowdon, base metals analyst, Barclays, New York.

Cutbacks falterWhile high physical premiums have insulated high-cost smelters from lower LME aluminium prices to a degree, there have been one or two casualties of curtailment, such as Hydro’s Kurri Kurri smelter in Australia. Overall though, production cutbacks have not been as sharp as expected early this year.

INTL FCStone analyst Ed Meir is sceptical about the depth of much-reported global cuts in primary aluminium production. “The pace of shutdowns has not been as great as

you might think. While there have been little cuts made by western world smelters, China has not made significant cutbacks in the interests of supporting existing stimulus measures and maintaining employment.” Smelting capacity is actually growing through China’s investment in coal-based energy generation in the west of the country, he notes.

David B. Wilson, director, Metals Research and Strategy, Citi Research, concurs that there have not been sufficient production cuts: “While there has been much talk of cutbacks in Europe, the US, and Australia, where Kurri Kurri has now actually closed, a combination of political negotiations and high physical premiums for ingot have helped to keep smelters earmarked for curtailment running.”

“China has been a disappointment in terms of supply constraint this year,” says Snowdon. “Given the cost structure of the Chinese market, we would have anticipated greater cutbacks in the country’s major areas of aluminium smelting, such as in Henan Province.” He adds that provincial governments have stepped in to support their local smelters in the interests of supporting their industrial base and employment.

Costs and pricesWilson cautions against comparing Chinese smelter costs against LME aluminium prices. “The fact is that the world does not have just one cost curve to consider because China’s smelters price against Shanghai prices which are typically $300/tonne higher than LME levels due to the impact of VAT on imported metal.” With Shanghai prices averaging $2,450-$2,500/tonne this year, few Chinese smelters have been under significant cost pressure, he notes.

Meir points out that a $100/tonne fall in the aluminium base price has been more than

Calling a messyprimary marketAluminium price falls over the past year have increased pressure on high-cost smelters, relieved in part by higher physical premiums. Production cuts have been lower than expected, while China’s capacity climbs. Stocks stay high. Richard Barrett asks leading analysts what will happen next

World refined Aluminium produCtion*

Region 2010 2011 Jan-Jun Jan-Jun 2011 2012Europe 8,710.5 8,981.0 4,481.0 4,461.4Of which: Norway 1,090.0 1,202.3 601.2 601.1Russia 3,947.0 3,992.0 1,981.3 2,040.0Africa 1,742.0 1,812.7 888.7 790.5Asia 21,730.2 24,304.3 11,820.6 12,753.1Of which: China 16,244.1 18,061.7 8,686.3 9,489.3India 1,609.9 1,659.7 846.5 849.4UAE 1,342.9 1,765.0 877.5 948.1Americas 6,997.2 7,153.4 3,526.4 3,436.0Of which: Brazil 1,536.2 1,440.4 709.6 727.3Canada 2,963.2 2,983.1 1,478.7 1,346.9USA 1,727.2 1,983.5 950.8 1,051.3Oceania 2,272.0 2,302.0 1,137.0 1,127.5Of which: Australia 1,982.0 1,945.0 962.0 962.5World Total 41,451.9 44,553.4 21,853.7 22,568.5*’000 tonnes Source: WBMS

World refined Aluminium Consumption*

Region 2010 2011 Jan-Jun Jan-Jun 2011 2012Europe 8,137.6 8,374.9 4,446.5 3,898.9Of which: Germany 1,911.8 2,103.3 1,077.3 1,021.5Africa 711.2 701.5 351.0 351.0Asia 24,460.6 26,496.6 12,933.9 14,092.0Of which: China 15,854.5 17,628.7 8,501.3 9,501.1India 1,474.8 1,569.2 760.7 870.0Japan 2,025.0 1,945.8 953.6 963.0South Korea 1,254.6 1,233.3 645.9 667.3Americas 6,423.1 6,404.1 3,219.5 3,463.0Of which: Brazil 985.1 1,077.1 554.6 507.6USA 4,242.5 4,060.0 2,043.5 2,493.4Oceania 319.2 355.2 177.6 163.4Word Total 40,051.8 42,332.2 21,128.4 21,968.2*’000 tonnes Source: WBMS


offset by a $150/tonne increase in premiums. Queues at some LME-approved warehouses and metal tied up in financing deals have further served to cloud the market, he says. “The premium play is offsetting the market evolution based on supply-demand balance, making the whole process a bit slower.”

Snowdon reminds that low interest rates are a key driver of the continuation of large amounts of aluminium inventories being tied up in financing deals. “Even when we have seen some metal being released from financing deals in the past when LME time spreads have tightened, the record size of the inventories acts as a counterbalancing mechanism, re-strengthening the contango and the economics of financing deals.”

The upward trend in physical premiums is a consequence, which has in turn held back a supply response by smelters, he explains. “They typically receive as much as half of the premium, compensating to some extent for falls in the LME base price for aluminium.”

Another impact there is new significant supply of bids from financiers for new metal produced, creating a constant demand. “Consequently some smelters that would otherwise be uneconomic, with production costs higher than LME metal prices, still don’t have trouble selling their production,” says Snowdon.

macroeconomics matterOvershadowing traditional supply-demand fundamentals, the macroeconomic picture is having a big influence on aluminium. “That will result in sluggish growth this year and next. The European situation has not been resolved yet and may well reach a crescendo when patchwork remedies fail to be enough,” says Meir. “EU politicians will probably decide eventually that Greece has to leave the euro, give the Greek government some collateral to get their own independent currency going, but then hold the line on the rest of the countries affected by the euro debt crisis. All the signals seem to be pointing in that direction.” Until the European situation resolves, a cloud will hang over all the metal markets for a while, he concludes.

Wilson also links aluminium’s prospects with the wider global economic situation: “It’s difficult to be optimistic for aluminium at present, with US Federal Reserve chairman Ben Bernanke neither ruling out nor confirming the likelihood of further quantitative easing and little sign of expectations for a firm Chinese economic stimulus programme being fulfilled.”

Meir says that the Chinese have excess production capacity in aluminium and simply not enough homes for it: “China’s export markets are drying up and there simply isn’t sufficient domestic demand to soak up that

demand locally.” He also points out that further central government infrastructure development plans are not coming forward.

He does not see any immediate drivers to get out of these macroeconomic problems: “We already have zero interest rates. We’ve had the internet, real-estate and Chinese growth bubbles, but they are all behind us now. We’re not sinking, but we’re also not growing.”

China’s output climbsPaul Adkins, managing director of China aluminium consultants AZ China, gives a clear view of the Chinese part of the aluminium equation.

In the last 12 months, China’s state-owned smelters produced around 35% of the country’s primary aluminium output (7 million tonnes), according to AZ China’s Red Book. Adkins notes that official production numbers do not include all smelters. Privately owned smelters produced 7.5 million tonnes, publicly listed businesses produced 4.3 million tonnes and joint ventures around 0.6 million tonnes. Total output of a little over 19

million tonnes contrasts with estimated installed capacity of 23 million tpy.

State-owned smelters comprise Chalco and a couple of enterprises primarily concerned with energy production, but which have smelters as a secondary activity, Adkins points out. “Other smelters are owned by provinces, but of course no smelter in China is immune from some degree of central or local government intervention – not least through power prices – and consequently none can operate entirely independently.”

Although government-owned smelters are inclined to get preferential power tariffs and tax incentives and include some of the ‘star’ smelters in their portfolios, they also include a few of the less efficient. China’s rate of growth in capacity for primary aluminium smelting is forecast to be around 10% per annum – roughly in line with demand by AZ China’s estimates. Almost all of the growth will be in Northwest China, where costs are low.

AZ China estimates that an additional 900,000 tonnes of aluminium will be produced by new Chinese smelters in Q3

Aluminium 3 months lme dAily offiCiAl priCe ($ per tonne)

Source: LME, MB

1,500

2,000

2,500

$ per

tonn

e

30/8

/11

27/9/11

25/10

/11

22/11

/11

20/12

/1117/

1/12

14/2/

12

13/3/1

2

10/4/

128/5/

125/6

/123/7

/1231/

7/12

28/8

/12

lme stoCks Aluminium high grAde

Source: LME, MB

4.5

5.2

5.1

5.0

4.9

4.8

4.7

4.6

30/8

/11

13/9/11

27/9/11

11/10

/11

25/10

/11

8/11/11

22/11

/11

6/12/11

20/12

/113/1

/1217/

1/12

31/1/1

2

14/2/

12

28/2/

12

13/3/1

2

27/3/1

2

10/4/

12

24/4/

128/5/

12

22/5/

125/6

/12

19/6/12

3/7/12

17/7/1

231/

7/12

14/8

/12

Milli

on to

nnes

ABB’s history of powering primary aluminium plants started 45 years ago. Ever since, we have been supplying complete electrification solutions and substations to more than 60 aluminium smelters worldwide. Demands for improved environmental performance and increased energy efficiency, price fluctuations and intense competition are the major challenges aluminium producers face today. ABB meets these challenges by providing state-of-the-art electrification, automation and process optimization solutions – always with the objective to increase your productivity and maximize your return on investment. For more information, visit us at www.abb.com/aluminium

Maximize your return on investment?

Absolutely.

Main Technology Center for electrical,control and instrumentation systems5405 Baden 5 Dättwil, [email protected]

Aluminium

Overview


2012, 800,000 tonnes in Q4 and an extra 250,000 tonnes in Q1 2013. The final additional capacity provided by these smelters (nine starting up in Q3 2012, two in Q4 and another two in Q1 2013) when they are fully operational will be considerably greater.

Snowdon says that in the western Chinese provinces, most notably Xinjiang, the pace of smelting capacity growth this year has actually been slower than initially anticipated, but production is still expected to climb in the region. “Overall, we are unlikely to see any significant constraint on Chinese production going forward given lower cost of production for this new capacity. The country is unlikely to see a sustained period of deficit because it has more than enough capacity. Some imports of primary metal may be drawn in by a price arbitrage window, but there is no real fundamental support for imports to rise. We are still seeing semis exports from China, so there is a counterbalancing trade flow there.”

China is largely a neutral factor over the next 12 months, says Snowdon.

Adkins says that Western world smelters have little immediate cause to fear ingot exports from China’s expanding aluminium smelter base since present economics simply do not encourage them while Shanghai (SHFE) prices are $200-$300/tonne higher than LME, even after differences between Chinese and European premiums, and would demand a significant government subsidy to make it happen.

He says that is not the central government’s goal – providing more jobs is – and that there are other steps it would be likely to take to promote the aluminium industry before providing such export subsidies: “they might offer low-interest loans or forgive bad debts for example.”

Aluminium exports as semis or finished products, such as in extrusions or alloy wheels – both of which have already attracted WTO attention – are a more “insidious” threat, but European and US trade bodies are keeping a close eye on Chinese exports and are poised to jump on anything that looks like dumping.

A lacklustre outlookThe consensus view of analysts from Metal Bulletin’s quarterly Apex update is for aluminium prices to drift upwards (see graph), but none are particularly bullish.

“Saddled with surplus and new capacity, aluminium is a metal for which it is hard to get excited,” says Meir. “We have near-term lows of $1,827/tonne for aluminium, with a downside of $1,730 for 2012, but the price could rally to $2,080 later this year. Next year we expect the trading range to be $1,800-2,200/tonne, corresponding to an average of $2,000.”

Despite China’s overall economic growth, “The Chinese equity market has been sinking for years,” Meir notes, which he says gives a clue to underlying uncertainties about how robust Chinese economic conditions really are. Some suspect loans and one or two troubled banks give the analyst further cause for concern.

Snowdon also says that aluminium remains burdened with record overcapacity and inventory, which prevents a sustained positive trend in flat prices. “A key to us becoming ultimately more constructive about the aluminium market would be a moderation in the impact of financing deals, but we struggle to see any dramatic shift over the next 12 months – there is unlikely to be any dramatic change.”

He adds that costs for the aluminium sector globally are an important factor which could alter market dynamics. “They have the potential to force a shift on the supply side. There has actually been a slight moderation in cost inflation in aluminium this year since some inputs are linked to the LME primary aluminium price. Nevertheless, energy aspects will continue to be a source of inflation, putting pressure on margins. We don’t see costs being a game breaker for 2012 or 2013, but they still need careful monitoring. They are a key factor that can make or break the supply side’s ability to continue to operate under the current price level.”

Citi has forecast modestly rising aluminium prices, with an estimated average price of $2,125/tonne expected next year. “We just don’t see a particularly big upside and don’t see the current prices giving impetus to production cuts, with excess continuing to be absorbed by investor demand for metal to put into financing deals,” says Wilson.

He says that the energy cost outlook is looking fairly benign. “US gas prices are low and, with shale gas production in the USA set to climb, and with the emergence of shale oil production, the USA could even become a net exporter of oil. Eastern Chinese smelters are being supported by subsidies against high energy costs, while the growth of smelter capacity in the west of China is being spurred by significantly lower energy costs in Western states.”

Snowdon stresses that the situation now is different from 2008, when 8 million tonnes of capacity was removed from use. “We don’t contemplate a dramatic shift in the finance backdrop, which means we are unlikely to see as dramatic shifts in the supply picture over the next 12 months.”

The long-dated contango has been very strong this year, but commercial hedging comes in waves, meaning that tighter spreads do arise from time to time, temporarily weighing against the economics of financing and resulting in off-warrant material coming on to the physical market, Snowdon explains. “Physical premiums certainly won’t necessarily rise inexorably over the next 12 months.”

As and when change does eventually take place in the financial picture, such as a firm move towards higher interest rates, that will have a softening impact on physical premiums, although bottlenecks in removing metal out from exchange inventories are likely to prevent a dramatic flooding effect of the physical market, concludes Snowdon.

Adkins reminds that the Chinese aluminium industry as a broadly denationalised enterprise is still relatively young, so the possibility of a reversal of privatisation policy in the future if smelters become increasingly uneconomic does not seem out of the question. However, he cautions that China views its aluminium sector from a different perspective than do Western eyes: not so much as a market or even an industry, but rather as a long-term strategic means to much bigger goals, including urbanisation, increasing the nation’s capital stock per capita to catch up with other industrialised countries, and advancing aerospace and potentially military development. “On a 30-50 year timeframe, aluminium is a vital part of that bigger picture.”

“You have to say that latent demand continues to be very robust as far forward as the eye can see… The market in China is not the main question. The industry is not the main question. Strategic development of the people is.” So the question the Chinese ask is how to ensure that China has enough of the light metal to ensure it plays its part in the future of the country, he concludes.

mB ApeX: Aluminium

Weighted average Average of analysts’ forecasts, weighted by accuracy of previous forecasts

Average consensus Unweighted average of analysts’ forecasts

Low The bear view

High The bull view

1,700

1,900

2,100

2,300

2,500

2,700

2,900

Fore

cast

pri

ce ($

per

ton

ne)

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42013 2014 20152012

Aluminium

Primary technology


The well-established industrial process for producing primary aluminium was introduced as long ago as 1886 by Charles Martin Hall and Paul Héroult independently, but it has undergone substantial leaps forward in efficiency, capacity and environmental performance as it has evolved towards the technology used today. Major aluminium producers continue to pursue developments, with key projects in the pipeline that aim to provide further gains in terms of productivity, operating costs and lower capital expenditure.

Rio Tinto Alcan’s AP Technology™ has been one of the principal smelting systems in use around the world, responsible for over 6 million tpy of global aluminium capacity, says the company. It has evolved from AP18 to AP30 series potlines, with operating currents increasing from 180 kA to 380 kA and above as new designs have been launched. In the company’s $3.3 billion modernisation of its Kitimat smelter in British Columbia, Canada, the potline technology will have progressed to AP40, operating at 405 kA and an energy consumption of 13.15 MWh per tonne of aluminium. The upgraded 420,000 tpy

Kitimat (representing a 48% capacity increase) is expected to start up in the first half of 2014.

In parallel with this, Rio Tinto Alcan has been developing even higher amperage systems. The original such project was termed AP50, targeting an operating current of 500 kA, but this has evolved into the AP60 project with the aim of reaching 600 kA. Phase one of its commercial demonstration is being built at the company’s Jonquière smelter, Saguenay-Lac-Saint-Jean, Quebec. The $1.1 billion first phase will consist of 38 cells with a capacity of 60,000 tpy; these are expected to start up in the first half of 2013. The second and subsequent project phases will comprise second-generation AP60 cells, and bring total capacity to 460,000 tpy.

AP60 technology is intended to be an industry benchmark, enabling a step-change in productivity by overcoming the challenges of very high current potlines, says the company. It is claimed to deliver:– lower capital expenditure per tonne of capacity– improved labour productivity and reduced operating costs

– shorter construction, commissioning and start-up schedules for a given capacity.

The first-generation AP60 cells will operate at 570 kA, each producing 4.3 tpd of aluminium (40% higher than AP30 smelters) with a consumption of 13.3 MWh/tonne. The second generation will operate at 600 kA, producing over 4.5 tpd at under 13.0 MWh/tonne.

While AP60 is intended to be the platform for future AP generations, Rio Tinto Alcan is also developing a low-energy technology termed APXe at its r&d centre in Saint-Jean-de-Maurienne, France. This system aims to eliminate all perfluorocarbon (PFC) emission-inducing anode effects and have a specific energy consumption of less than 12 kWh/kg of aluminium. It is envisaged that the APXe concepts will be available to incorporate in existing AP smelters.

Better productivity Dubai Aluminium (Dubal), the 1 million tpy state-owned smelter in the UAE, has developed a series of in-house smelting technologies as it has steadily expanded its capacity to its current seven potlines. The company’s DX system was introduced in 2005 as a prototype, and an improved second-generation version was launched as a 40-cell commercial operation in potline no. 8 in 2008. These cells operate at 380 kA with an energy consumption of 13.25 MWh/tonne, and a cell output of 2.87 tpd.

Dubal has subsequently redesigned the technology for improved performance, termed DX+, and this system was installed in five pilot cells in 2010. The DX+ cells are 0.3 metres wider and 0.6 metres longer than the DX version, although the inter-pot distance is the same. This results in the productivity per square metre of potroom being raised by over 17%.

Initially operating at 420 kA, the DX+ pilot cells are ultimately expected to reach 460 kA with a targeted energy consumption of less than 13.33 MWh/tonne, an average yield of 3 tpd per pot, with metal purity above 99.89%. Anode effect frequency is said to be very low, and Dubal’s proprietary advanced control logic restricts the average anode effect duration to less than 10 seconds. This is a world benchmark for lowering PFC emissions, says the company.

The first commercial contract for DX+ technology is for the phase 2 expansion of Emirates Aluminium (Emal) in Abu Dhabi, of which Dubal is the 50% joint owner with Mubadala Development Co. Emal’s two existing DX potlines operate at 353 kA and produce 750,000 tpy of aluminium, while the phase 2 third potline with 444 cells will operate initially at 420 kA, producing 520,000 tpy. The new line is scheduled to start up in the first quarter of 2014.

The development of higher-current and more energy-efficient smelting is also being pursued by Hydro, which launched its HAL4e project in pilot cells in 2008. They have been running

Smelting’s new eraThe primary aluminium process has undergone continual refinement for over a century, and major producers have further advances in the pipeline to gain greater efficiencies, reports Steve Karpel

RIo T

InTo

ALC

An

The 60,000 tpy first phase of Rio Tinto Alcan’s AP60 smelter at Jonquière, Canada, will start up in the first half of 2013

www.fivesgroup.com Driving progress

Qatalum aims to operate one of the most efficient aluminium smelters in the world with minimal environmental impact.

Thanks to state-of-the-art Gas Treatment Centers, combined with downstream sea water scrubbers, emissions of hydrogen fluoride, sulphur dioxide and dust have been reduced to the lowest levels under all operating conditions.

Fives Solios’ Gas Treatment Centers have been chosen by customers for more than 50 smelters worldwide.

Fives Solios, designing today the aluminium plants of the future

What about managing your emissions?

Qatalum selected Fives Solios’ solutions to reduce its global emissions

Aluminium

Primary technology


consistently at 420 kA and 12.5 MWh/tonne of aluminium for the last three years at the Årdal Research Centre, norway, says a company spokesman, who adds that the long-term goal is to reach a productivity of 10 MWh/tonne.

HAL4e was still being tested and analysed when Hydro’s newest smelter, Qatalum, was built, but it will be available for future projects when full-scale trials are complete.

Raising standardsUC Rusal has been engaged in a wide-ranging programme of technology advances to employ in its smelters, which it says has brought them up to international standards. In 2003, it launched RA-300 technology, which operates with a current of 320 kA, energy consumption of 13.746 MWh/tonne and a cell output of 2.442 tpd of aluminium. This system is being installed in the new 600,000 tpy Boguchansky smelter, which is expected to begin its start-up phase next year.

The company subsequently introduced its RA-400 technology in 2005, designed for increased energy efficiency and environmental performance. Operating at a current of 425 kA and an energy consumption of 13.54 MWh/tonne, each cell produces 3.016 tpd of aluminium. RA-400 cells will be used in the new 750,000 tpy Taishet smelter which is expected to start commissioning in 2014. Both RA-300 and RA-400 cells were first tested in Rusal’s Sayanogorsk smelter.

Rusal’s latest generation technology is RA-500, the cell design for which was completed in 2011. This is claimed to endow further improvements in terms of lower capital and operating expenditures, as well as energy efficiency and environmental performance. The cells operate at 520 kA current with an energy consumption of 13.10 MWh/tonne, each pot producing 3.96 tpd of aluminium. The next stage is to build an RA-500 test area at Sayanogorsk, says a Rusal spokeswoman.

Notwithstanding these advanced pre-bake smelting technologies, Rusal notes that the majority of Russia’s aluminium is produced using the older Søderberg system which is less efficient and emits more pollutants. Accordingly, Rusal has worked on an improved Søderberg process that can be retrofitted to many of its smelters. This resulted in the development of its ‘Clean Søderberg’ technology in 2009, which employs a colloidal anode paste instead of the standard type. This contains a lower concentration of pitch – the main source of tar-related emissions.

Along with an efficient gas removal system and a revamped pot structure, the Clean Søderberg technology is claimed to cut hazardous emissions (including fluoride emissions by 75%), reduce anode consumption by 7% and cut aluminium fluoride consumption by over 30%. Rusal has

introduced the system at its Krasnoyarsk site and plans to extend it to its smelters at Bratsk, Novokuznetsk, Irkutsk and Volgograd.

Rusal is also developing a radically new technology that might be described as a ‘holy grail’ of smelting – the use of inert anodes that contain no carbon. Without carbon, there is no possibility of emissions of carbon dioxide, polyaromatic hydrocarbons or other carbon-related compounds. The main by-product emitted would be oxygen.

In addition, an inert anode would not be consumed like a carbon anode, and so would not need to be regularly replaced.

Rusal highlights the advantages of this technology:– The elimination of greenhouse gas and polyaromatic hydrocarbon emissions– A cut in operating costs via reduced energy and anode consumption– A cut in greenfield project capital expenditure of over 30%.

The company is developing its inert anode technology in Krasnoyarsk, where initial testing is carried out on a pilot scale. This year, Rusal has succeeded in reducing the anode-related impurity levels in the aluminium to 0.58% – a six-fold improvement over earlier results. “Rusal has also achieved one of the best results in the world on the corrosion rate of the inert anode,” says the spokeswoman, who adds that industrial-scale trials are planned for 2015. These will take at least 1.5 years, and commercial decisions on the technology will be taken after that period.

Precise controlDeveloping more sophisticated potline technology is one way of advancing primary aluminium production, but considerable benefits can also be obtained by simply exercising closer and more accurate control of the various production parameters in existing smelters.

Alcoa has developed a portable potline device called STARprobe™ to measure these important parameters, which it has been using at most of its smelters around the world for several years. From this year, it has decided to commercialise it and make it available to the global industry via licensee STAS of Canada.

The device measures several properties of the cell electrolysis bath: superheat (the temperature above the liquidus), temperature, alumina concentration and cryolite ratio (acidity). The fact that these parameters are measured and indicated simultaneously in real time is important for the optimal control and efficiency of the electrolysis cell, says Alcoa.

It is common practice in potrooms to carry out bath sampling and temperature measurements separately, which delays obtaining the full set of results needed. The real-time analysis possible with the STARprobe

is able to provide the critical parameters at the same time, and allows the potline to be run closer to its optimal operation, the company explains.

The device uses differential thermal analysis (DTA), which measures phase and heat changes in the cell bath plus an inert reference material. When molten cryolite is cooled from its liquid to a solid state, it undergoes several phase transformations accompanied by heat releases, where the latter can be directly related to the bath composition.

In practice, the STARprobe is inserted into the molten bath, the temperature is allowed to equilibrate, and it is then removed from the bath. During cooling, the probe calculates all the required results, which can be automatically transferred wirelessly to the potline control system or stored. It takes about four minutes to complete a set of measurements.

The use of the device has allowed more efficient operation of potlines, says Alcoa, including:– a 0.5% improvement in current efficiency– voltage savings of 35 mV– 5% savings in aluminium fluoride consumption– further cost savings in terms of X-ray equipment expenditure and labour for sampling and analysis.

After comparing results from several of its smelters, Alcoa says that it has verified that measurements obtained from STARprobe are as accurate as, if not better than, those from traditional sampling and analysis.

UC

RUSA

L

UC Rusal has been developing several aspects of primary production, including high-efficiency prebake, clean Søderberg and inert anode cells

Aluminium

Flat rolled products


Since it has plants in eleven countries and on four continents, the performance of Novelis, one of the world’s largest producers of aluminium flat rolled products, gives a useful snapshot of global markets.

In its fiscal first quarter for 2012/13 (April-June 2012), the company shipped 722,000 tonnes of rolled products, down 6% year-on-year. Softness in Asia and economic uncertainty in Europe and China are the chief reasons for the decline, the company said at its earnings conference call in August.

“Asian softness” is explained by slower demand from electronics, both for exports to the West, and by faltering growth in Asia and China. Economic growth in China is taking a slower path as government policies are adjusted to cope with weaker export markets and a failure of domestic demand to fill the

gap. US shipments for electronics have been severely cut too, having recovered only slightly since the global downturn.

Nevertheless, packaging demand remains strong, and although standard sheet and coil markets are depressed, output and consumption are still growing to a degree. “Semis growth in China will be 11% this year – slower than the last few years, but still meaningful,” Lloyd T. O’Carroll of Davenport Investment says.

Europe’s economic paralysis is well documented, with end-users of flat rolled products feeling that more business would be there if only the political situation would take a more decisive turn. From 2010 to 2011 overall output and consumption of flat rolled products were more-or-less unchanged – even in Europe’s powerhouse Germany.

According to Metal Bulletin Research, the overhang of European production capacity could be as much as 250,000 tpy.

Spokesman for Hydro Aluminium in Germany, Michael Peter Steffen says: “We see more short-term procurement from customers in many [sectors], especially the more cyclical markets such as general engineering.”

There is some strength in Western markets in satisfying growth in automotive demand. The luxury car market in Asia is contributing to that, and light vehicle production in the USA is largely responsible for an estimated 5.8% rise in shipments of flat rolled products in 2011, according to the Davenport Quarterly.

Foil and can sheetNovelis’s success in Brazil is based on its strength in the can sheet market, which the

Seeking higher groundBig producers of flat rolled products have their long-term sights set on expanding uses into new areas, but immediate market growth in present global economic conditions is meagre, writes Sandra Buchanan

Sustained demand from the automotive sector and an uptake in construction has improved US sentiment

NOvE

LIS

INC.


Market-leading products.Sustainable processes.As a worldwide manufacturer of fl at rolled aluminium, Alcoa leads the way in innovation and sustainability.

Our wide portfolio of high-quality materials is the foundation for many everyday products, and serves the commercial transportation, building and construction, industrial, packaging and consumer goods markets.

Alcoa’s unique global footprint is realized through production units and outstanding R&D facilities across the world.

Our technical and commercial experts can provide you with state-of-the-art solutions in product development, process optimization and intelligent supply chain concepts, tailor made to your specifi c needs.

Learn more about Alcoa Global Commercial Transportation, Industrial and Specialties at www.alcoa.com/grp

Advancing each generation.

Alcoa GRP advert 126x209_margin.indd 1 05/09/2012 09:46www.aidaalloys.com

Aluminum grain refiner.

Aluminum master alloys: altib, alsr10, alsi50, almn20, alti10, alv10, alzr10 in ingot, rod or castcut forms.

Alloying compact as tablet and briquette form: Elements available are Cu, Cr, Ni, Fe, Mn, Zn, Ti.

Ceramic foam filter: We can produce all kinds of size CFF to satisfy customers’ needs.

Aluminum melting fluxes: Available in powder, granular and tablet form.

Silicon metal lumps & Ferro Alloys: Manganese Metal Lumps/Powder/Briquette.

The products have been exported to many countries in Asia, Europe, American, Japan and Asia.

SIHUI AIDA ALLOYS CO., LTDAdd: Nanjiang Industrial Park, Sihui,

Guangdong Province. P. R. China 526241Tel: 86 758 3855723/3851721 Fax: 86 758 3851719

Mobile: 86 18666511033/ 13509958238/ 13902892161E-mail: [email protected]

SHENZHEN AIDA ALUMINUM ALLOYS CO., LTD

Aluminium



company says is “recession proof”. Packaging traditionally takes around 45% of the total flat rolled product market. Foil has so many end uses that its demand potential remains positive, while growing markets for can sheet in Asia, the Middle East and Brazil add buoyancy to this sector.

Novelis will increase capacity for can sheet production at its mill in South Korea, where it is on target to start up a $400 million expansion by year end. The company is also investing $50 million in a new coating line at its rolling mill in Brazil. Meanwhile in Hong Kong, China, Pacific Can has just started up its fifth plant.

Hydro has an Asian mill concentrating on foil. “We have focused our Malaysian plant on particularly thin, high-performance foil, thereby securing our strong foothold in the Asian market for premium packaging products… With an output of more than 10,000 tpy our Malaysian plant ranks among the major operations in Asia,” says Steffen.

European drinks can manufacturers have sports fans to thank for a boost of 5.5% in 2011 – 57 billion compared with 54 billion in 2010 – and 7% year-on-year in the first quarter, according to industry association Beverage Can Makers

Europe. Canmakers correctly anticipated thirsty crowds at the European Football Cup and, more recently, at the London Olympics.

While foil is a solid source of consumption, some products are faring better than others. In Europe, household foil demand looks good, and is looking even better since anti-dumping duties threaten Chinese imports. Supply has been constrained with the recent closure of Spain’s Inasa, and Novelis has sold some foil assets. Despite duty-free access for South Korea, the weaker euro has damaged profit margins, deterring ready-rolled imports. Demand for foil in the USA is stable. Imports of Chinese foil are constrained.

Mena targetSeeking fresh export markets, China has targeted the Middle East and North Africa, where packaging accounts for around half of consumption. The Gulf is Mena’s biggest consumer of flat rolled products, accounting for around 40% of regional usage.

However, geo-political and financial problems in the Middle East have limited demand at a time when its own flat rolled product capacities are being rapidly expanded – another 600,000 tpy was commissioned in 2011, and more is scheduled to come on-stream this year, according to MBR.

Foil imports from the USA have grown quickly to feed expansions of the aircon and refrigeration industries in Saudi Arabia, where there are no foil mills at present, but new capacity will come on-stream next year when the Alcoa joint venture with Saudi’s Ma’aden begins to meet demand from Saudi state-funded infrastructure projects and various fledgling industries.

Alcoa’s investment in downstream production in the Middle East is notable. Originally planned for production of only food-grade can sheet, the joint venture now aims to produce an extra 100,000 tonnes of sheet for automotive, construction and foil stock. This will compete with the region’s largest roller, Garmco, which is itself expanding its own mill in Bahrain.

India lacks sufficient foil and can sheet production capacity of its own, so Chinese and Gulf rollers find good export markets there. India is seeking safeguard duties to block Chinese imports of other flat rolled products, however.

Times were when growth in aluminium consumption was driven by new applications for castings, but, according to US Harbor Intelligence in its June report The Outlook for Cars, Cans and Construction, “The next two decades belong to sheet.”

Indeed, sentiment among US sheet and coil manufacturers is already bullish. Sustained demand from the automotive sector and an uptick in construction this year are supported by capacity restrictions. Since the start of the year

margins have been at a ten-year high. That encourages imports.

“Indonesia has excess capacity, a potential problem,” O’Carroll says, “and significant volumes of commodity sheet are coming into the west coast from China – US producers should be watching that,” he adds. A surge in imports from South Africa has raised US suspicions of dumping.

European economic uncertainties swept prices and margins of coil and sheet sharply downwards last year. Major Indonesian and Chinese mills have seen margins shrink too, as demand for sheet and coil has contracted. Output of South Korean coil has fallen, but producers can probably rely on the region’s can sheet and litho sheet markets, which are relatively unaffected by the downturn.

Good demand from aircraft manufacturers leaves western world plate producers in a strong position. In the USA, Alcoa, Constellium and Kaiser are all investing to expand aerospace capacity to keep up with Boeing and Airbus build rates and several years of backlog. Commercial plate is not enjoying the same market strength, however.

Last year’s earthquake and tsunami affected Japanese production and consumption. Output of flat rolled products rose slowly through the first half, but was down by 4% year-on-year, while foil output was 20% lower, according to Japan’s Nalk Corp. In the second quarter there was a fall of 7% in can stock production, but shipments of all semis to automotive gained 32%.

Operations reconfiguredAutomotive production has been recovering, with output in the USA close to 13 million units in 2011 – double that in 2009, but still much less than the 18 million units produced in 2007.

US AlUMiniUM orderS index

Source: MBR, AA

ChinA net exportS

Source: MBR, CNIA

50

70

90

110

130

150

170

190

210

230

Feb 11 Jun 11 Oct 11 Feb 12 Jun 12

(200

9 =

100)

Sheet Plate

Foil Canstock

0

20

40

60

80

100

120

140

160

180

200

Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12

('000

tonn

es)

Export of FRPs

Daily semis production

prodUCtion And AppArent ConSUMption oF FlAt rolled prodUCtS by region*

2010 2011 2012 fEUROPEProduction 3,591 3,511 3,688 inc Germany 1,877 1,835 1,871Consumption 3,310 3,446 3,459 inc Germany 1,317 1,327 1,372ASIAChina output 6,799 8,094 2,134 Q1Consumption 6,808 7,928 2,178Taiwan output 139.3 143.2 34.7Consumption 163.9 159.1 33.3Japan output 1,403 1,313 278 Consumption 1,159 1,151 241USASheet, plate 3,396 3,515 1,850 H1shipmentsConsumption 3,361 3,442 1,799Foil shipments 480 568 244Consumption 481 536 256*’000 tonnes Source: MBR


www.metalbulletinstore.com [email protected] +44 (0) 20 7779 7999

Back by popular demand...

Order nowOrder now

Iron & Steel Works of the World 2012Metal Producers of the World 2012Industrial Minerals Directory 2012£495/€566/$849 eachPublished on 1st July 2012

www.mbdatabase.comwww.mbdatabase.comwww.mbdatabase.comwww.mbdatabase.com

Aluminium



vehicle sales are projected to rebound further this year, and – thanks to CAFE standards and higher oil prices – greater use of aluminium body sheet will raise overall aluminium content.

“Car body sheet has been the holy grail for twenty or thirty years. The full switch could take 10-15 years, but we’re seeing the first of it,” says O’Carroll, adding: “Novelis and Alcoa are adding capacity, and there’ll be at least one more in the USA in the next five years. Germany is auto-focused too – Aleris has positioned itself with Duffel [Belgium] as an auto-focused mill, and I expect someone in Japan will add capacity too.”

volumes are relatively small at present, but Steffen stresses that Hydro has been continuously expanding output: “We see a continued strong growth in the demand for body-in-white sheet in particular.” The nameplate capacity of Hydro’s two finishing lines for automotive sheet in Germany is around 40,000 tpy.

Alcoa’s new capacity includes a $300 million expansion at its Davenport, Iowa, rolling plant, where it broke ground this year. The expansion will include a new heat-treatment line and other finishing equipment suitable for auto sheet.

Novelis will expand operations at its Oswego, New York, rolling mill by 200,000 tpy by 2013, and Aleris is on track to expand production of wide sheet for car bodies at Duffel.

While optimising capacity in existing markets, company strategy is to expand in emerging markets to exploit their technological advantage. Phil Martens, president and ceo of Novelis, said during an earnings conference call in February that there are some 150 aluminium rolling mills in China, but more than 80% lack the technology to produce the value-added products that Novelis makes, such as can sheet, automotive sheet and parts for electronics.

Referring to Hydro’s Malaysian premium foil mill, Steffen points out that technology is not the only issue: “The exchange of best practice and integrated work with our other plants [in Europe] is of major importance and very helpful to strengthen this site.”

By selling its three European foil mills, Novelis has underlined its focus on other added-value products. O’Carroll notes that Novelis only goes where it sees an opportunity for specific innovation and can exploit its competitive advantage in high-value markets: “That means can sheet and auto sheet; there are plenty of good foil producers.”

While the company’s South Korea mill will strengthen its position in regional can sheet markets, boosting its Asian sheet capacity by more than 50% to 1 million tpy, Novelis plans to break ground later this year for its first China-based facility – a 120,000 tpy automotive sheet manufacturing facility in

Jiangsu province. “Our long-term goal is to sell virtually 100% within China,” the company says.

Joint venturesOther high-value markets targeted by flat rolled product mills in emerging markets are aerospace, engineering, petrochemical and transportation industries. But entry is not easy. At Platt’s Aluminium Symposium in January, investment banker Peter Matt of Credit Suisse observed that joint ventures are the best way to gain access.

Alcoa already has a small presence in China, including a sheet and plate mill in Qinhuangdao. But to set up a high-end fabricated aluminium operation in the country it took the joint venture path, signing an agreement with China Power Investment Corp in February.

Novelis is buying more equity in its South Korean subsidiary, and Aleris has formed a

joint venture with China’s Zhenjiang Dengsheng Aluminium Industries, which will focus on plate.

Zhenjiang Dengsheng is the world’s biggest producer of foil for air-conditioners, with exports accounting for over 30% of its sales. Last year the Aleris Dengsheng Aluminium joint venture broke ground for a rolling mill with capacity to produce 250,000 tpy of – both heat-treated and non-heat-treated – rolled plate. The plant is due for completion at the end of this year.

While the globalised rollers have generally recorded meagre improvement in recent demand – although Alcoa shipped 6% more in 2011 than 2010, Novelis shipped 4% less, Aleris 3.2% less, and Hydro 1.7% less – O’Carroll says that overall, the flat rolled product market is growing. It looks as if the overall share of high-value products could grow too, with auto sheet taking the biggest portion of that share, he opines.

A long-terM VieWTaking a long-term view on the future for aluminium flat rolled products is particularly hard at times of great volatility, as now. Trends that have become received wisdom in the semis business are being undermined by current exigencies and market distortions abound – some of which are political. Protectionist moves, and efforts by some market participants to drive the ingot premium to unheard of heights – despite the market actually being awash with metal – are just two examples. Nevertheless, certain trends prevail.

growthPreviously market dips tended to be confined to Europe or to Asia or to the Americas. Now, for the first time in 50 years, there appears to be a world-wide slowdown in flat rolled products and other markets. The world is in sync. Nevertheless, pent-up consumer demand is still there, crisis fatigue is setting in and, as confidence slowly returns, it is likely that growth will return to the 8 -10% long-term average. That mandates around 1.7 million tpy of new rolling capacity for flat products every year. The question is where it will be located.

CostsMajor players in the developed world with high cost base cannot compete in the market for standard products. Reckoning may be delayed by anti-dumping and/or straight protectionism but, inexorably, distributor sheet and coil will be sourced from less-developed regions.

This might continue to be Eastern Europe over the next two or three years, but more likely Asia.

New capacity is already coming on line in India, Indonesia, Thailand, Malaysia and

vietnam and, of course, in China where much of the equipment is top quality. In the short term European and North American mills may reverse this trend to gain volume, but margin erosion makes this a less attractive option. Signs are that mills would rather run with lower utilisation.

environmentAlthough there is an estimated 200-250 ktpy capacity overhang in the European flat rolled product market, automotive body sheet seems likely to mop this up as environmental issues force efficiencies – eventually even into economy car markets.

Purpose-built new mills for auto sheet in Europe are a possibility, but less so in the USA, where environmental issues have yet to impact to the same degree. In China they are already a reality with Novelis’ 120 ktpy auto body cold mill coming on line in 2014, and China Zhongwang building a 1.8 million tpy mill – equipped to make high-volume auto body sheet.

Recycling, weight saving and corrosion resistance are the selling points of an energy-hungry aluminium business. Energy savings of around 50% overall are widely quoted for production using recycled metal and much increased recycle rates are anticipated.

However, the tendency for raw materials processing to be based in the developing world where cheap energy is also available, with sometimes less-than-transparent jurisdictions, seems set to continue. The wisdom of locating state-of-the-art rolling mills in the same areas is yet to be fully tested.

Andrew Robinson, Metal Bulletin Research


Quote promo code 4581 when ordering

You are also able to request a brochure, sample extractsand detailed table of contents for more information

www.metalbulletinresearch.com

NEW

What is the current market for aluminium castings?

Who are major user segments and applications foraluminium castings?

What are the key geographical markets foraluminium castings?

The Global Market for Aluminium Castings to 2021

FIVE EASY WAYS TO ORDER +44 (0) 20 7779 8000 +44 (0) 20 7779 8090 [email protected] Metal Bulletin Research, Nestor House, Playhouse Yard, London, EC4V 5EX UK

Aluminium

India


The fall in average LME aluminium prices from $2,603/tonne in the first quarter of 2011 to $2,177 in the first quarter of 2012, in the face of sharp rises in input costs, has eroded the margins of aluminium businesses globally – including those in India.

The situation is even worse now with the metal price falling further. What, however, gave some relief to Indian producers was domestic demand rising last year by 9% to 1.698 million tonnes. This was almost in line with local production of 1.662 million tonnes, which included 675,000 tonnes by the Vedanta group, 574,000 tonnes by Hindalco and 413,000 tonnes by the government-owned National Aluminium Company (Nalco).

India is a simultaneous exporter and importer of the metal. Last year Hindalco’s focus was on domestic sales, as it tried to derive the most from its assets and optimise its product mix.

“If last year was challenging with margins coming under pressure, it is more so now with LME prices down further and absolutely no relief on the costs front,” says Nalco chairman and managing director Ansuman Das. The industry bore the brunt of coal costs rising 20%, furnace oil by 40%, carbon by 30% and caustic soda by 25% in FY 2011-12, with a recession-hit world market offering no scope for passing the rising costs to metal buyers.

Das notes: “Indian aluminium makers – all with integrated operations – are in the lowest cost quartile in the world as they have the benefit of local availability of high-quality bauxite and also coal, albeit with high ash content. So you may see occasional aluminium production cuts because of disruptions to supplies of coal and bauxite, but...the Indian industry should be seen as the last one standing in a very difficult aluminium market.”

At the same time, Nalco has had long-standing problems with obtaining adequate supplies of domestic coal. The company’s fall in aluminium production by

31,000 tonnes to 413,000 tonnes in 2011-12 is largely because of its failure to generate adequate power because of coal shortages. In fact, had not Nalco been importing coal to supplement supplies, its metal production would have suffered a bigger setback. Its annual coal requirements are around 6 million tonnes.

“There are extra costs involved in coal imports, especially when the value of India’s currency has depreciated considerably vis-à-vis the dollar. Buying coal via local auctions is also expensive. Nearly 20% of our coal requirements are met by imports and auction buying,” says Das.

An official of the Confederation of Indian Industry says: “The experience of the other two aluminium producers is no different. In the face of stagnation in coal production, our imports are up from 50 million tonnes in 2009-10 to 152

million tonnes last year. This is unfortunate since the country is sitting on coal reserves of over 275 billion tonnes.” The answer to the problem would seem to be in allocating coal reserve blocks to aluminium makers, as is done for the power, steel and cement industries.

Fifth largest India’s bauxite reserves of well over 3 billion tonnes are the fifth largest in the world. Nearly 55% of these are in the eastern state of Orissa, which also has about 25% of the country’s coal reserves.

Even so, Vedanta, unable to open any mines in Orissa’s Niyamgiri hills on environment grounds and because of continuous agitation by local and foreign NGOs on behalf of the Dongria Kondh tribal people, is forced to buy bauxite from wherever in the country it is available to run its 1 million tpy alumina refinery at Lanjigarh. The refinery is, therefore, running at low capacity and has from time to time faced the prospect of closure.

Hindalco, which sources bauxite from mines in four states, including Orissa, to run its three refineries of combined capacity 1.5 million tpy, has complained about a “cost push on account of falling bauxite quality”. The challenge for it is to open new mines by getting access to fresh deposits – deterioration in mineral quality is unavoidable in old mines.

However, Hindalco managing director Debnarayan Bhattacharya says: “Notwithstanding the India-specific incremental cost pressures, the company has the most profitable aluminium operations among global peers in terms of Ebitda margins.”

The irony is that, in spite of its rich bauxite deposits, India has not seen the opening of a

Mining delays hamper progressThere are numerous integrated aluminium projects in India, but a combination of raw material supply problems and local opposition to mine projects is holding up progress, reports Kunal Bose

World AluMiniuM consuMption

Source: National Aluminium Co

indiA AluMiniuM consuMption

Source: National Aluminium Co

Machinery/equipment 9%

Consumer durables 6%

Electrical/electronics 11%

Construction20%

Transport28%

Packaging18%

Other8%

Machinery/equipment 7%Consumer durables 7%

Others 6%

Packaging 4%Construction 13%

Electrical/electronics48%

Transport15%

Aluminium

India


major new mine since the commissioning of one at Panchpatmali hills in Orissa’s Koraput district by Nalco some 28 years ago, to feed its refinery in Damonjodi. Panchpatmali, by far the largest bauxite mine in India, will have its annual capacity expanded by 525,000 tonnes to 6.825 million tonnes.

Even though Panchpatmali is still left with some 150 million tonnes of mineable bauxite and Nalco has secured another 75 million tonne deposit in neighbouring Pottangi after a 20 year chase, the company remains in a vigorous hunt for fresh deposits for long-term raw material security.

“Not only are we going to add capacity to our 460,000 tpy smelter at Angul in its third phase of expansion, but we are also going to build a new 500,000 tpy smelter in Orissa’s Sundargarh district,” Das points out. The Nalco board will have to decide whether Angul’s brownfield capacity expansion will be by way of amperage increase of the four potlines or by building a fifth potline. The smelter at Angul was built with technology from Aluminium Pechiney, now part of Rio Tinto Alcan.

Vedanta Aluminium managing director, Sushil Kumar Roongta, asserts: “Whatever the problems are in building and running a smelter in India, it has the potential to become a very big centre for making aluminium. Local availability of the two principal raw materials apart, the demand for aluminium in India will continue to grow at 8% to 9%, the second highest in the world after China. At our stage of economic development, the principal drivers of aluminium demand will be the power sector, automobile, construction, packaging and electronics.”

Das agrees, saying: “Rapid urbanisation, a proposed trillion dollar investment in infrastructure in the 2012-17 plan period and a growing middle class will continue to lift India’s per capita aluminium consumption from 1.3 kg, which compares unfavourably with China’s 14 kg. The country’s annual smelting capacity will rise by 1.3 million tonnes to 3 million tonnes by 2015-16.”

Alumina refining and metal smelting will be inviting some “big ticket” investments from domestic and foreign groups once bauxite and coal mine allocation, and their development, become easier.

What, however, is a cause of major concern for investors is the troubling experience of Vedanta, which has committed investments of nearly $10 billion in the aluminium chain, including 3,600 MW of power in Orissa, on the basis of a state government promise of adequate bauxite deposit allocation for running the refinery, which will have a final 6 million tpy capacity.

“Our Lanjigarh refinery is built to use high-grade Orissa bauxite. But our inability to procure bauxite from the state is forcing us to use whatever we could get from Gujarat,

Maharashtra and other states at considerable extra cost. As I’m speaking to you, the refinery is scraping the bottom of its bauxite stocks and may be forced to stop production,” Roongta asserts.

In a demonstration of their disappointment with the failure of state undertaking Orissa Mining Corporation (OMC) to feed the refinery with adequate bauxite, nearly 7,000 people employed directly or indirectly at the refinery, their family members and other local people, are regularly organising demonstrations, protest marches and strikes at Lanjigarh.

The protests are spearheaded by Lanjigarh Anchalika Bikash Parishad (Centre for Development of Lanjigarh). Its president, Sridhara Pensia, says: “It will be a big disaster for the local community if the refinery is shut for want of raw material. This is the only industry in Lanjigarh. It is because of Vedanta that we now have decent schools and health centres here. This situation of the refinery being starved of bauxite is not acceptable. We will take our demonstrations to the offices of the state chief minister and also prime minister for allocation of new deposits in lieu of Niyamgiri.”

prospecting licences acquiredVedanta recently acquired Dubai Aluminium’s 24.5% ownership of Raykal, which has prospecting licences for bauxite deposits in Orissa’s Sijumali and Kurumali, of the Rayagad and Kalahandi districts, respectively. According to Vedanta, it retains the right to acquire 100% of Raykal at a cost of Rs18.11 billion ($325.11 million) “subject to certain milestones being achieved”. The Indian engineering firm Larsen & Toubro is the principal stakeholder in Raykal with 75.5%.

Raykal is a prize catch for Vedanta although it will be at least four to five years before actual mining could start, for it is a time-consuming process to convert prospecting licences into mining licences and secure environment and forest clearances. The Orissa Directorate of Geology says the prospecting licence areas at

Sijumali and Kurumali hold bauxite deposits of 250-280 million tonnes. The Raykal breakthrough does not mean that Vedanta will stop pursuing the Orissa state government for bauxite supplies.

Vedanta is not the only group to face resistance in its attempts to open mines. Neither is Orissa the only state where opening a new mine can run into big hurdles.

Hindalco will soon be commissioning a 359,000 tpy smelter at Bargwan in Madhya Pradesh just as another of its smelters of identical capacity is fast coming on stream in Orissa. The two smelters are to get their alumina from a 1.5 million tpy refinery being built in Orissa. This is to be fed with bauxite from deposits at Baphlimali in Orissa,where villagers are obstructing mine development to press their demand for “a comprehensive development of areas to be affected by mining”.

And at the mine opened at Mali Parbat, also in Orissa, Hindalco is facing resistance from local villagers.

The situation in Andhra Pradesh is perhaps worse, since in bauxite-rich areas Maoists have a free run. Security concerns have led Jindal Aluminium to shelve its alumina refinery project in this state. Anrak Aluminium, which is in advanced stages of building a 1.4 million tpy refinery, is not sure whether it will be able to source the required quantities of bauxite locally.

Nalco has been allotted two blocks with combined bauxite deposits of 80 million tonnes by state government agency APMDC, so that it could build and run a 1.4 million tpy refinery. But with concerns about the security in mine areas, and also on government advice, Nalco is not doing anything more than some “soft social development work” in the two blocks.

Industry officials say that if this logjam in mine opening is not broken soon, then India at some point could become a net importer of aluminium.

The author is a specialist writer based in Kolkata.

VEDAN

TA A

LuM

INIu

M

India produced over 1.66 million tonnes of aluminium last year, almost matching its demand

www.metalbulletin.com/mobile-app

The mobile app is now liveGet your latest global metals news on the move

Available for iPad and iPhoneFree to download from the App Store

MB_App_FP_ad_8-12_FP ad 209 x 274 17/08/2012 11:31 Page 1

Aluminium

Innovative applications


“With the slow improvement of the economy, a lot of aluminium producers are focusing on and finding new markets and uses for aluminium,” says Stephen Gardiner, spokesman for the Arlington, Virginia-based Aluminum Association. Aluminium’s low density and “green” environmental attributes are paving the way for this growth.

One very promising development is aluminium-lithium alloys for the aerospace industry, which have been championed by both Pittsburgh-based Alcoa and France-based Constellium.

“It has been known for several decades that if a viable aluminium-lithium aerospace alloy could be developed it would have some amazing properties, given that lithium is the lightest metal in the periodic table,” says Eric Roegner, president of Alcoa Forgings and Extrusions. He adds that while the first aluminium-lithium applications go back as far as the 1950s, commercialisation has been slow since it is a very difficult alloy to work. In its molten form it needs to be worked in an inert environment in a dedicated facility.

While so-called second-generation aluminium-lithium alloys in plate form have been used for certain space and defence applications for the past 20 years or so, it was not until about 10 years ago, when it was decided that the Boeing 787 Dreamliner and the Airbus A350 would be carbon-fibre composite-intensive, that there was a real push for third-generation aluminium alloys to be used in both single- and twin-aisle commercial jetliners, which both Alcoa and Constellium have since introduced.

Alcoa developed a suite of next-generation aluminium-lithium alloys, including three patented alloys, each of which is aimed at different customer needs for many applications or major structural product forms, including sheet, plate, extrusions, forgings and structural castings, says Mark Vrablec, president of Alcoa Rolled Aerospace, Transportation and Industrial Products,

noting that while the bulk of the alloys in this suite did not reach the level of commercialisation viable for customer use until a little over two years ago, the first alloy in the family was used for the fuselage and the floor structure of the A380, which has been flying about seven years.

Constellium has also developed a new version of its AirwareTM aerospace alloys, which were originally developed by Alcan Engineered Products. A company spokeswoman says that the next generation of Airware aluminium alloy (Airware also includes aluminium-copper and aluminium-silver products) can deliver about a 25% weight reduction when combined with advanced welding and high-performance innovative redesign of the aero structure.

Mike Southwood, senior aluminium consultant for CRU, says that aluminium-lithium will be increasingly popular as it should help airframe builders shed the weight of their aircraft. It does have an upfront price premium, but Roegner says it lowers the cost to manufacture, operate and

repair planes by up to 30% compared with carbon fibre composite-intensive planes.

Vrablec says that Alcoa is already working on a fourth-generation aluminium-lithium product to meet the tradeoffs that airframe producers need for their next aircraft platforms.

Tailored for vehiclesSupporting the general agenda by automakers to lighten the weight of their vehicles to meet corporate average fuel efficiency (CAFE) requirements, Novelis, Atlanta, Georgia, which is in a joint venture with ThyssenKrupp Tailor Welded blanks (TWB), has been pushing for the use of aluminium – as opposed to steel – tailor welded blanks in light vehicles.

Roland Harings, its vp, global automotive, says that Novelis has developed a new three-piece tailor welded blank produced using the company’s new Anticorodal-300 (Ac-300) aluminium alloy – joined using friction stir welding – for the doors, hood and various structural applications, including the transmission tunnel, for the 2012 Mercedes-Benz SL.

The new Mercedes-Benz SL has an all-aluminium body-in-white. According to Harings, it is about 110 kg, or greater than 40%, lighter that it would be using steel tailor welded blanks, which have become commonplace for autos, including high-volume models. He says aluminium tailor welded blanks could be used for any auto component that now uses steel versions.

CRU’s Southwood observes that there have been several high-end vehicles that have had all-aluminium structures, such as those produced by Jaguar and Audi, but those were not really mass market vehicles. “It would be the holy grail if it would be accepted for a high-volume vehicle,” he says.

Innovation opens new marketsAluminium’s properties have opened the door for it to gain ground not only in existing applications but also to make important inroads into new end uses, reports Myra Pinkham

By using tailor welded blanks, the Mercedes-Benz SL aluminium body-in-white saves some 110 kg in weight compared with a steel version, according to Novelis

NoVE

LIS

Aluminium

Innovative applications


Novelis is hoping this recent move is a first step in making that happen, confirms Harings, who notes that while the Mercedes-Benz SL is a relatively low-volume vehicle with about 30,000 produced per year, it will allow automakers to test how aluminium tailor welded blanks could work in a high-volume car or truck.

“This initial project will get the technology in place and then we can focus on the next step, which is having an automaker use aluminium tailor welded blanks for a part of the body-in-white structure – possibly in the doors or the sidewalls – of a high-volume vehicle.” Harings says that Novelis has had a good reception from various OEMs for this product and is in negotiations to advance it to the next level.

Drilling down Aluminium has been used on and off for oil and natural gas drill pipe applications for as long as 30 years, says Jay Grissom, marketing director of Alcoa Oil & Gas, Pittsburgh. Even with a resurgence of interest in using aluminium for this application over the past five years or so, carbon steel still has a dominant share of the $2 billion a year drill pipe market.

“We think that aluminium could eventually achieve a 10-15% share of the drill pipe market, but it could take a while as it generally takes a number of years for new technologies to become established in the oil and gas industry,” Grissom says.

Aluminium offers many advantages over E-Grade steel drill pipe, says Jamal Righi, Alcoa Oil & Gas’s general manager. Its dry weight is up to 40% lighter and its wet weight more than 50% lighter than steel, resulting in improvements in load, torque and drag properties – which means superior horizontal and directional drilling performance.

Alcoa claims that incorporating aluminium alloy drill pipe into either onshore or offshore drilling programmes enables a company to drill to much greater depths faster and without sacrificing performance or reliability. That is because with its high strength-to-weight ratio, aluminium alloy pipe can reach ultra-deep reserves and engage in directional drilling programmes previously considered unworkable.

Grissom says that originally, common aluminium alloys were used, but more recently aerospace-grade high-strength alloys, such as high copper and zinc 2000-series alloys, have been used to handle today’s more complex and sophisticated wells, with the advent of not only more horizontal drilling but also more directional extended reach drilling (ERD).

It was BP’s Liberty well in North Slope, Alaska, which had been proposed in 2007, that

is credited with the renewed interest in aluminium alloy drill pipe. While that project was cancelled due to permitting issues, other companies, including Shell and Brazil’s Petrobras, later used aluminium alloy drill pipe. “Another thing that resulted in more interest for this product was when we began supplying oil and gas risers,” Grissom says.

Aluminium alloy drill pipe was first used almost solely in remote areas, where its light weight allowed it to be more easily transported by helicopter. Now it is used for a combination of onshore and offshore applications, including wells that originate on land and then go under the water to reach the pay zone. This practice tends to be a lot less expensive than a well that originates offshore.

Righi says that its light weight also enables its use for the small mobile drill rigs used in the Marcellus Shale to move from hole to hole. He adds that it could also be used to revisit wells that have been abandoned when they became uneconomic. Often as much as 50-70% of the oil or natural gas remains, which could be economic to extract when multiple pay zones are linked via aluminium drill pipe, he explains.

Quality canned In one established aluminium sector, packaging, there has been an increase in high-quality beer produced by craft breweries (incorporating microbreweries, regional breweries, nano breweries and brewer pubs) being packaged in aluminium cans.

Paul Gatza, director of the Brewers Association, Boulder, Colorado, says that up to about a decade ago, all craft beers were bottled, but now about 200 of the 2,000 or so craft breweries in the USA offer their beer in cans.

“I would expect it to continue to grow,” Southwood says. According to Gatza, craft breweries account for about 6% of total US beer sales and at present can 5-8% of their beer.

The canning of craft beer has grown about 20% in 2011 and 2012 with Sierra Nevada and New Belgium, the second and third largest craft breweries in the USA, recently converting some of their production to cans.

One thing that prevented this from happening earlier, says Brian O’Reilly, brew master at Sly Fox Brewing Co, Pennsylvania, is finding low-volume packaging equipment. Traditionally, craft breweries used wine bottling equipment until Cask Brewing Systems of Canada, in a venture with Ball Corporation, designed a small canning machine. Now there are also mobile canners that go from brewery to brewery to help them can their beer.

While it has sometimes been believed by some consumers that only cheap beer comes in cans and that they can “taste the metal” with canned beer, that perception is fading, says Russ Phillips, author of the craftcans.com blog. “The truth is that with advanced can technology, the beer doesn’t come in contact with the can,” he notes, as the cans are lined with a water-based polymer.

He adds that there are many other advantages to canned beer, including: preventing all exposure to light that can adversely affect its taste; achieving less exposure to oxygen in canned beer than in bottles so the beer could last longer; and the fact that cans do not break and are lighter when empty, making them more convenient for outdoor consumption. Cans are also totally recyclable, giving brewers another selling point.

Gatza notes that cans, especially the new 16 oz size, are a good fit for convenience stores, giving craft breweries another outlet for their products. “I think the growth trend will continue,” he concludes.

The author is a specialist writer based in New York.

CRAF

TCAN

S.Co

M

ALCO

A OIL

& G

AS

Craft beers are increasingly packed in cans

Aerospace-grade aluminium alloys are now used for wider varieties of drill pipe

This manufacturer overhauled its power system, lowered costs and boosted production all at the same time.

At Dubai Aluminium, 30% of the cost of aluminium production was related to electricity. That was simply unsustainable. So it collaborated with GE Energy. And together we sparked an idea that made their operations so efficient, the project paid for itself in energy savings within just three years.

Visit ge-spark.com/dubal/mb to learn about the Dubai Aluminium story.

Tayeb Al Awadhi, Vice President, Power and Desalination, Dubai Aluminium (right)and Fadi Tabboush, Account Executive, GE Energy (left).

supplements aluminium - metal bulletin...case study).” • “the ability of the sector to attract...

Documents