Author: Ingrid Jörg, Chairman of Aluminium Europe
As the economy begins to recover from the pandemic, increased demand for raw materials, coupled with labor shortages, supply constraints and global shipping crises, are exacerbating Europe’s existing strategic vulnerabilities. The European aluminum value chain is a good case study, which emphasizes the need for a strong European manufacturing base and stable framework conditions to enable companies to compete, invest and innovate.
Aluminum manufacturers produce and recycle a strategic material, which is critical to achieving the European Union’s ambition to become the world’s first climate-neutral continent by 2050.Aluminum is essential in many key low-carbon fields, such as mobile, construction and renewable energy technologies. Not only can aluminum be recycled indefinitely, but its unique properties also help reduce carbon dioxide.2 Emissions of many products during the use phase. For example, the aluminum lightweight cars produced in Europe this year will reduce 50 million tons of CO2 The emissions of a vehicle during its life cycle. Due to the contribution of aluminum to energy-saving products, global demand for this metal is expected to increase by 50% by 2050. In Europe, half of the demand can be provided by primary aluminum, and the other half can be provided by recycling.
The aluminum industry is constantly improving its own processes. Thanks to our ingenuity, the carbon footprint of European aluminum production (27 EU countries, UK + EFTA) has been reduced by more than half since 1990.The carbon footprint of primary aluminum production in Europe is one of the lowest in the world: approximately 7 kg of carbon dioxide2 Per kilogram of aluminum compared to the global average of 17 kilograms of carbon dioxide2 And China’s average of 20 kilograms of carbon dioxide2.
However, despite Europe’s role in aluminum production and the growing demand for this metal, Europe is becoming increasingly dependent on imports. In order to reverse the current trend of carbon and investment leakage, Europe needs to effectively level the playing field and put its industry at the top of its strategic agenda.
To this end, improving trade rules and restoring normal market operations are essential so that all producers, no matter where they are, geographically or in the aluminum value chain, can compete on fair and transparent conditions. The European Commission has taken measures to combat unfair trade, such as formulating a proposal for an instrument on foreign subsidies and imposing a final anti-dumping duty on Chinese aluminum profiles. But a recent committee decision directly contradicts the EU’s broader trade and sustainable development goals.
In October, the European Commission completed an anti-dumping investigation on some aluminum rolled products from China, clearly confirming that China dumped (up to 80%) to the EU market, causing significant material damage to EU producers. The final anti-dumping duty is set at 14% to 25% to raise China’s dumping price to a price consistent with the market. However, the tariffs that took effect on October 12, 2021 are immediately suspended until June 12, 2022. After the suspension period, an unreasonable suspension will have a devastating effect on the EU aluminum value chain. What is puzzling is that the EU is willing to open the floodgates for high-carbon dumping products, while its domestic industries can meet demand with more sustainable products.
Our competitiveness is further threatened by the inability to obtain affordable green energy, which is particularly important for the highly electricity-intensive primary aluminum production. Due to the unique electricity market in the European Union, European aluminum producers face unique electricity price carbon costs and other regulatory costs related to European climate policies. Therefore, European producers are at a disadvantage in the global market because aluminum is publicly traded, while other global producers are not affected by the same types of costs. The Commission’s current proposal for the Carbon Boundary Adjustment Mechanism (CBAM) does not help prevent carbon leakage, and more fine-tuning is needed to finally become a measure suitable for the European aluminum value chain. Regardless of the final design of CBAM, it is still an untested complex mechanism, and it must first be demonstrated that it can achieve expectations. Until then, the existing carbon leakage measures must be retained to protect strategic industries in Europe, reduce accidental risks and minimize uncertainty.
A consistent and predictable energy and climate framework in Europe will send the necessary signals for long-term investment, which is necessary to strengthen our technological leadership and achieve a green transition.
If the EU cannot create suitable framework conditions for our industry to remain competitive, the entire aluminum production in Europe may be replaced by Chinese aluminum. To quantify: Europe’s annual turnover, more than 600 factories and more than 1 million (direct and indirect) jobs will lose more than 4 billion euros! Not to mention that the loss of our value chain will lead to a substantial increase in global emissions.
This worst-case scenario is not fictitious. China has successfully squeezed several European industries out of the market and established a near-monopoly in raw materials. Let us never forget the case of magnesium and the trickle-down effect of the loss of raw material production in Europe on other industries. Since the last European magnesium plant was closed due to illegal dumping by China in 2001, the country has developed into a major magnesium supplier in the world: more than 87% of the world’s magnesium is produced in China; more than 93% of European magnesium demand depends on Chinese imports.
Since mid-September, due to China’s production cuts, the supply of magnesium has decreased significantly, leading to rising magnesium prices and uncertain production prospects. As an important aluminum alloy element, magnesium shortages will affect many end-use sectors, including automobiles, aerospace, defense, construction, packaging, and consumer durables.
Europe has failed to save its magnesium value chain, but the window of opportunity to defend its European aluminum industry remains open. For Europe to succeed, open strategic autonomy must become a tangible reality. This means taking concrete steps to protect and incentivize EU production by implementing strong and consistent trade and industrial policies, enabling people to access affordable green energy, and accelerating long-term investment, thereby reducing Europe’s dependence on third-country raw materials .
