INTERVIEW: European Aluminium calls for swift action to make market competitive

The European aluminum industry needs swift action to keep the region competitive in the wake of high energy prices, expensive raw materials and increased global competition, Paul Voss, director general of industry body European Aluminium told S&P Global Commodity Insights in an interview at the aluminum trade fair in Dusseldorf on Oct. 8.

"There is a need for a serious shift to competitiveness for the European aluminum industry; we won’t sit and wait for someone to solve our problems, we must engage," Voss said.

Energy, global competition woes

Voss spoke extensively of the struggles facing European aluminum producers due to the high cost of energy and called for energy subsidies to be given to industry participants to allow them to cope with the increased cost of power in Europe.

Following the Russian invasion of Ukraine in February 2022, energy costs rose significantly as the EU turned away from its reliance on Russian gas.

Platts, part of Commodity Insights, assessed the Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26, 2022. Prices have now fallen significantly with Platts last assessing Dutch TTF month-ahead at Eur39.55/MWh Oct. 11.

However, the gas and wider energy markets remain jittery to supply-side shocks and geopolitical tensions.

"Competitiveness is undermined by the energy costs. Prices are still 15%-20% higher than they were before the Russia-Ukraine war and aluminum is a very energy-intensive industry; we need urgent relief," he said.

For context, the average Platts assessment of Dutch TTF month-ahead across Sept. 2019 -- prior to COVID-19 and the Russia/Ukraine war -- was Eur12.77/MWh, while the average across September 2024 stood at Eur36.16/MWh.

European Aluminium has previously called on the European Commission for more coordinated energy, trade and industrial policies to facilitate the European aluminum industry's decarbonization goals.

Chief to their mission is remaining globally competitive and preventing carbon leakage, in which aluminum production would shift to locations outside the EU, where production costs lower and environmental policies are less stringent.

The European aluminum industry has seen a steady decline across the past decade(opens in a new tab) with Western and Central European primary aluminum production falling 28.61% from 2010 to 2.71 million metric tons in 2023, according to International Aluminium Institute data.

Meanwhile, primary aluminum production in Russia and Eastern Europe only fell 5.57% from 2010 to 4.02 MMt produced in 2023, IAI data showed.

CBAM

Voss expressed concerns over the EU's planned introduction of the Carbon Border Adjustment Mechanism in 2026.

Phasing in from 2026, CBAM will levy a carbon tax on imports of selected energy-intensive materials and products into the EU, including aluminum, removing the gap between the EU's ETS carbon price and the export country of origin carbon price.

CBAM will initially only cover Scope 1 emissions for the majority of CBAM products, including aluminum. Other emissions-intensive industries such as the stainless steel sector have also called for CBAM to cover the whole supply chain scope 1-3.

Scope 1 refers to a company's direct emissions, Scope 2 includes indirect emissions such as from the generation of purchased electricity and Scope 3 covers wider indirect emissions including, among other things, business travel and end-of-life treatment of sold products.

"CBAM will make things worse -- it was an attractive idea but the mechanism is complex, and the net effect will be making Europe less competitive," Voss said. "Decarbonization can’t come at the cost of industry as emissions will simply shift elsewhere."

Many market participants have also expressed anxieties over the implementation of CBAM with strict data reporting requirements placing additional pressures onto the industry.

"There is no getting rid of it [CBAM]. However, there is likely to be a tolerance period [when CBAM is first instigated]," Voss said.