With February’s focus being nonferrous thermal processing, it seemed appropriate to look at what is happening in the aluminum industry and discuss how it is marketing itself. This may actually have an effect on the ferrous industry in the years to come.

Several new market-research reports out recently have some input on the worldwide aluminum industry. One asks/answers the question: “Will China be the world’s new green aluminum fabricating base?” Clearly, the development of this nation is resulting in the expansion of aluminum-fabricating capacity in China. In the past five years, China’s aluminum fabricated-product output grew at an annual rate of 34.1%.

The numbers from China’s National Bureau of Statistics indicate that the country became a net exporter of aluminum foil in 2004 and expected to become a net exporter of aluminum strip and plate in 2008. This means that China can currently supply the growing domestic consumption rate and more. Will China’s increasing export volume create concerns? A recent Alcoa news release announcing production cuts indicated that Alcoa’s competitors (including producers in China) should also cut production to avoid oversupply and the accompanying price depression, which caused the cuts.

While production cuts may be needed in China, some of this excess capacity could be turned inward with further domestic demand growth. For instance, only 19% of domestic production is used in the transportation market compared to 30% in developed countries. This is expected to increase. Also, Chinese per-capita consumption of aluminum plate and foil (combined) averages about 1.3 pounds compared to the world’s average of 4.4 pounds – another opportunity for domestic growth. Will this growing domestic aluminum usage keep up with the 54.3% increase in aluminum-fabrication capacity expected between 2007 and 2012?

As a result of excessive debt and a credit-tight economy, Rio Tinto Alcan announced an agreement to sell its 50% share of Qingtongxia Aluminum Co., a 150,000 metric ton/year joint-venture aluminum smelter in China’s Ningxia Province. They have also offered about $10 billion of other assets for sale, which include Alcan’s engineered products and packaging operations. China Power Investment Group recently announced it would maintain a 70% share of Qingtongxia Aluminum Group with the government retaining 30%.

Another recently released report indicates that high growth is expected for the world aluminum die-castings market. The market segments discussed in this report are automotive/internal-combustion engines, industrial, commercial and defense, consumer OEMs, computers and telecommunications.

I have noticed that the aluminum industry spends a lot of time and advertising dollars talking about how much energy can be saved by using aluminum in a variety of products for weight reduction. These promotions frequently talk about the reduction in greenhouse gases attributable to using aluminum. By necessity, this puts the aluminum industry among those that seem to be agreeing with anthropomorphic global warming (GW) even though the verdict is far from conclusive. Unfortunately, the extension of this is something that will be hard for the industry to live up to because of the energy-intensive nature of aluminum smelting.

Lining up with this global agenda will, by necessity, encourage the activists to continue to find a way to tax us (and the aluminum industry) for emissions. Check out IHs website bulletin board for the latest information about the GW agenda. A working paper from the International Energy Agency in the fourth quarter of 2008 examined the impact of the EU’s Emissions Trading Scheme (ETS) on the European aluminum-smelting industry. Although there was no strong evidence that it is driving industries to more pollution-tolerant countries, they conclude that “it seems likely that this might occur.”

In fact, earlier in 2008, Alcoa in Australia was looking for an exemption on carbon trading to keep aluminum plants from closing. They felt that without the exemption the aluminum would be produced by more pollution-tolerant places such as Qatar, Nigeria or Malaysia. Our prediction is that aluminum producers such as Alcoa will try to exempt themselves from the very restrictions they are encouraging (or at least not discouraging) for their commercial benefit.

A recent write-up indicated that the aluminum industry is “well on pace to become ‘greenhouse gas neutral’ in the next decade.” They assert that any GW impact caused by aluminum production will be offset by the amount of greenhouse gases saved by its use in the transportation industry. Nice try, but this is not likely to fly with GW-tax “industry” looking for their pound of flesh. Sometimes the monster of our own making is very ugly indeed. Carbon trading/taxing is such a monster. IH