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Aluminum Review

Tariffs Have Become Baked In

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Though not a champion of Section 232 tariffs when they were introduced, the Aluminum Association says steps to unwind them should be taken slowly and carefully. 

In 2018, when the Trump administration was contemplating the implementation of Section 232 tariffs on the steel and aluminum industries, the respective sectors had much different takes. While the steel production community was overwhelmingly in favor of levies on foreign steel, the domestic aluminum industry was, at best, indifferent to the idea.

Three years later, Section 232 still hasn’t won over a lot of folks in the aluminum supply chain. But that doesn’t mean it wants the Biden administration to jettison the tariffs at the earliest moment. 

“The world has changed over the last three years and markets have changed. While we were not in favor of the drastic move of putting 232 in, we would not advocate for the drastic move of removing 232 in one fell swoop,” said Tom Dobbins, president of the Aluminum Association during a roundtable conversation at the group’s April meeting.

Essentially, the tariffs have now become a part of aluminum economics, and unraveling them must be done with care. 

“The removal of 232 has to be done in an organized way. Demand has adjusted to that. Now to remove it, we have to go step by step and do it properly,” said Marco Palmieri, chairman of the Aluminum Association. “Conceptually, we never agreed to 232, but to dig it out we have to do it in an organized way.”

While a wholesale removal of 232 is not in their plans, the association would like to see some changes made immediately. For starters, the association and its members are calling for adjustments to the exclusion process it has fought over since the beginning.

“As currently constituted, the program is making the U.S. a magnet for imports in some markets. More broadly, the administration should carefully consider exemptions for countries that trade fairly and have taken action to address unfairly subsidized imports into their own markets,” Dobbins said. 

Part of that objective is the idea the U.S. must continue to confront the real threat to global trade: China and its market-distorting ways. Doing that calls for cooperation, not conflict, with trading partners, the association argues. 

“If we really want to go after China and other bad actors, we have to do it as a united industry and free market economies working tighter,” Dobbins said. “To the extent we can reduce tensions between North America and Europe and other free market economies, we can work together to address the China issue.”

Trade, exemplified by the debate over Section 232, is one of three major issues the association will be pursuing with the new administration, with infrastructure and environmental issues the other legs of the stool.

On the infrastructure front, the association expressed support for the announcement of the $2.3 trillion plan by the Biden administration, and is looking forward to working with legislators and other policy makers in D.C. over the coming weeks and months to make sure a meaningful piece of legislation is finally delivered. 

“Speaking at a high level, aluminum is an essential part of this conversation – our metal is used widely in the electric grid, solar panels, electric vehicle charging stations and buildings of all kinds. 

Infrastructure investment also provides a once in a generation opportunity to modernize the nation’s recycling system,” Dobbins said. 

Recycling is at the heart of the third policy priority for the industry, staying at the forefront of advances in sustainability. Earlier in the day, the AA released the Aluminum Sector Shapshot, a rundown of the milestones achieved by the industry in the recent past. 

Modeled after a similar document from the Environmental Protection Agency, the Snapshot notes the industry’s significant gains, including a reduction in air emissions of 65 percent between 1996 and 2019, a 55 percent decline in energy usage between 1998 and 2018 and a reduction in greenhouse gas emissions by nearly 60 percent between 2005 and 2018.

One of the challenges of continuing to make gains is increasing the recycling rates of the material. Questioned about the adoption of a nationwide deposit law, the association was hesitant to fully embrace the concept, instead leaning on the same type of status quo position it is taking on 232.

“We favor it where it exists, and think it should be part of the suite of policy decisions that folks are looking at as they try to raise recycling rates,” said Matt Meenan, senior director of external affairs for the association. “But we have not come out in favor of  a full national deposit program.

Recovery Ongoing
As was the case for most industries, nonferrous metals were hit hard in 2020. The pandemic year saw a decline in production from 27.6 billion pounds to 24.5 billion pounds last year. Though not as dramatic a falloff as the 19 percent decrease from 2008 to 2009 as a result of the global financial crisis, it still represented an 11 percent drop. 

Nonetheless, the industry’s leaders are optimistic about its outlook. Year-over-year production in January was down just 2 percent, compared with the 20 percent falloff in the middle of 2020. And orders through March are up 13 percent from a year earlier. 
Orders for new aluminum products are up 13 percent through March, “a very good indicator of strong growth ahead,” said Palmieri, who also serves as president of Novelis North America. 

The long-term prognsis is even better. At a previous session, Pernelle Nunez of the International Aluminum Institute said global demand for metals such as aluminum is expected to explode in the coming years. 

She said the consumption of semi-fabricated aluminum products is projected to grow from 95 million pounds in 2018 to 170 million pounds by 2050. The growth will be driven by increased demand in consumer durables, transportation and electrical end uses. 

The Road to Sustainability
Also at the conference, one keynote session involved three experts sharing how their organizations are embracing new technology to ensure sustainability in the aluminum industry. 

Alcoa’s Montreal-based operation has partnered with its competitor Melbourne, Australia-headquartered Rio Tinto to create Quebec-based Elysis, a joint technology venture designed to eliminate all direct greenhouse gas emissions from the aluminum smelting process.

Alcoa’s Chief Innovation Officer Ben Kahrs spoke about both companies’ goal to eliminate CO2 emissions. From a process standpoint, Elysis involves “the elimination of the coke and the pitch in the carbon plant and by doing that, you eliminate all the CO2 and all the other things associated with fossil fuel inputs, and you’re left with just a pure emittance of oxygen,” he said. “This is a monumental environmental achievement that’s been the holy grail for those of us who have grown up in the smelting industry, and we’re very happy to bring it forward.” He noted the governments of Canada and Quebec, as well as technology giant Apple, are investors.

Elysis, which will be available in 2024, will be customized for greenfield operations or retrofit for brownfield operations. “This means that an existing production line will have the opportunity to deploy Elysis technology and eliminate their CO2,” Kahrs said. “This is important for both incumbent suppliers that don’t have to go and build another plant or build a brownfield replacement, and it’s also important for the communities around the suppliers that rely on the jobs, so they know their plant will have a solution that will allow them to meet their environmental commitments in the future.”

Elysis has already garnered worldwide interest. “From a producer standpoint, when you can bring something forward that lowers capital costs, lowers operating costs, and is a huge home run from a sustainability standpoint, naturally you get a lot of interest,” he added.

Alcoa is not the only business interested in improving aluminum’s sustainability. Novelis North America, headquartered in Atlanta, is also proud of its ambitious sustainability goals. “We’re in a pivotal moment right now. Our customers and their customers are asking for a greener planet and more sustainability initiatives,” said Bea Landa, vice president for metal procurement for Novelis North America. “And as an aluminum [business], we’re really in a unique position to be able to change the world,” she said. 

She emphasizes Novelis’ sustainability goals, which include a 30 percent reduction of CO2 emissions by 2026 and carbon neutrality by 2050. Novelis’ operational goals are also ambitious. The business is aiming to have a 10 percent reduction in energy use, a 10 percent reduction in water use and a 20 percent reduction of waste to landfill by 2026. 

She added that achieving this goal depends on Novelis’ customers and suppliers, as well as policymakers. “Our purpose at Novelis is shaping our sustainability world together. I want to emphasize the word ‘together’ because we need to achieve this as an industry,” said Landa. “This is an invitation for everybody to collaborate, share ideas as to how we can really position aluminum as a material of choice.”

Global Norsk Hydro’s Hans Erik Vatne, said his company has developed new technologies to help sort scrap. He says that while many of Norsk Hydro’s plants have standardized equipment for sorting scrap, X-rays cannot always distinguish between aluminum alloys. 

The company is using laser technology to distinguish 5000 series aluminum from 6000 series aluminum, as well as distinguishing between different 6000 series aluminum alloys. “With this technology, we are able to offer products to the market that contain up to 75 percent of post-consumer scrap,” he said. 

[Sidebar:]
Minimizing Dross is ALTEK’s Aim
Aluminum boasts many features: it is lightweight, malleable, durable and corrosion resistant.  And it’s recyclable, making it an environmentally appealing choice for the metals industry. 

However, even with the gains noted above, the aluminum industry needs to be more sustainable, according to James Herbert, global sales director of ALTEK, a Harsco Environmental dross mitigation and recycling company. Serving aluminum producers, the business is based in Chesterfield, Derbyshire, UK, with satellite offices in the Middle East and China, as well as a location in Malvern, Pa.

ALTEK’s expertise is in minimizing dross and recovering aluminum metal units from dross – key actions to help improve the sustainability of aluminum production. “Ever since aluminum has been produced, there’s been dross, and a lot of customers don’t realize how much money and how many metal units are trapped within that dross,” says Herbert. “Part of our expertise is to help companies understand that, to help companies maximize those metal units that can be recovered from the dross.”

Typically, dross accounts for 1 to 5 percent by weight of a facility’s total production, says Herbert, adding that worldwide, 3 million tons of dross are generated annually, with half this amount finding its way to landfills. “By managing dross, those additional metal units captured means that they do not need to be replenished by primary metal,” Herbert says.

“Dross is a byproduct of the melting process of aluminum, and we specialize in technologies to reduce the amount of dross that’s generated initially,” he continues. “That’s the goal, but you cannot get away from generating dross; however, you can minimize its generation, so we also have innovative technologies for extracting as many metal units from that dross, and recycling that dross in an environmentally friendly manner, with the approach to zero landfill and zero waste.” 

Metal units are lost through oxidation, so it’s vital to cool them before oxidation occurs. “These metal units are important because they can be extracted and recycled to ultimately produce more aluminum,” he says. “As soon as [the dross] leaves the furnace environment, that aluminum content starts to diminish because it starts to oxidize, so once it’s oxidized, you can never reclaim those metal units back; they’re lost forever.”
 
Minimizing oxidation occurs through a cooling technology, such as a dross press. Such rapid cooling also minimizes the amount of emissions generated and maximizes the available aluminum to be recovered downstream. Once oxidation is minimized, a rotary furnace can be used to extract the metal units from the dross. Herbert says the most efficient method to provide the highest metal recoveries is a tilt-type rotary furnace.

The dross recycling technology comes with a downside, however – it, too, generates a waste stream in the form of salt slag, considered hazardous in many countries. “That has to be dealt with appropriately and in accordance with local regulations, depending on the country you’re in,” says Herbert. “So historically that’s been a concern, and there have been different technologies that have been developed to recycle that salt slag.” This enables even more metal units to be recovered.

“The by-product of [recycling salt slag] is predominantly aluminum oxide, which can be used in a variety of value-add products,” says Herbert, adding that this approach maximizes metal recoveries, but also prevents waste from going into landfills.

Companies that effectively manage dross have the competitive edge, according to Herbert. “The way organizations handle their dross is a microcosm of how they operate the wider manufacturing operation to some degree,” he says. “Consumers are increasingly looking to buy from companies with a strong sense of corporate responsibility and a solid environmental track record. If companies want to stay in business and be competitive, they’re going to have to adopt these sorts of approaches.” 

Dross management can provide a return on investment within six months, according to Herbert. 

“The adoption of sustainable methods of aluminum production will not only drastically reduce landfill and atmospheric pollution, but will drive the aluminum industry to become a zero-waste industry,” he says. “Although much progress has been made across the industry with regard to reducing the energy consumption and carbon footprint, there is a long way to go.”