The aluminium industry’s key role in improving sustainability

Scrap-based aluminium production saves around 95% of energy compared to traditional primary aluminium production, making it a powerful tool for increasing sustainability.
Image: Alcoa

The trend towards lighter weight and e-mobility as well as the expansion of renewable energy are important drivers of the demand for aluminium. According to Dennis Rheinsberg of IKB Deutsche Industriebank, further expansion of recycling capacities is necessary in order to meet aluminium requirements, improve the energy footprint and reduce carbon emissions.

Aluminium plays an important part in advancing climate neutrality, so Dennis Rheinsberg, Director and Head of Energy, Utilities & Resources at IKB Deutsche Industriebank, writes in his current report “The aluminium industry’s key role in improving sustainability”. On the one hand, producing aluminium is extremely energy-intensive, meaning that investments to strengthen recycling programmes as well as energy and resource efficiency would cut down on high volumes of greenhouse gases. On the other hand, industrial demand for the light metal continues to increase across sectors due to its positive characteristics. ESG reporting is also gaining in importance due to the growing interest of end customers, and thus also downstream value creation stages, in the issue of sustainability. In addition, with the incremental implementation of the CSRD (Corporate Sustainability Reporting Directive), all companies will gradually become subject to regulatory reporting obligations; for a majority of large companies, binding business standards will enter into force starting in the financial year 2025.

In 2023, primary aluminium production grew by 2.3% globally, achieving a new record at 70.6 million t. The increase in Chinese production was the global growth driver in the previous year.
Source: IKB Deutsche Industriebank

Economic slowdown and energy prices strain European and German production sectors

Despite the strong decline compared to the record year 2022, energy prices are still significantly above the level of the late 2010s, particularly if fees and cost allocation are included, notwithstanding individual offsets. In view of this, it is not surprising that the European aluminium production declined by 7% in the previous year in conjunction with weak demand due to an economic downturn. In Germany, this decline even reached 10%, with volumes shrinking to 2.98 million t and a decrease of 45% in primary aluminium production to only around 190,000 t, which also reflected the closure of one of four remaining aluminium smelters. The German aluminium industry also recorded a significant decline of 9% in the area of further processing. The decrease by 15% to around 500,000 t in extruded products was particularly severe. The decrease of 7% for rolled products to approximately 1,830,000 t completes the negative picture. By contrast, primary aluminium production grew by 2.3% globally, achieving a new record at 70.6 million t. The increase in Chinese production was the global growth driver in the previous year. For the coming years, IKB anticipates moderate growth of the global primary production to 75 million t in 2027 and thus expects the structural supply deficit to continue. On the demand side, the trend towards lighter weights and e-mobility as well as the expansion of renewable energy are giving additional impetus to the sector. A further expansion of recycling capacities is necessary to meet aluminium requirements, improve the energy footprint and reduce carbon emissions. Scrap-based aluminium production saves around 95% of energy compared to traditional primary aluminium production, making it a powerful tool for increasing sustainability.

A demand for sustainability. Hydro invests EUR 180 million in new Spanish aluminium recycler.
Image: Hydro

ESG reporting still needs improvement at many companies

Weak economic growth and high energy costs are a strain on the European and especially the German aluminium industry. However, European climate protection policy is expected to provide impetus on the demand side in the medium term. The e-mobility ramp-up requires increasingly lighter weights in the automotive sector, the construction industry must become more sustainable and last but not least, in the course of the energy transition the booming area of photovoltaics comes with a high and specific need for aluminium. At the same time, end customers and processors in the value chain are increasingly questioning the level of sustainability in production. In this respect, any gaps in sustainability reporting must be closed quickly, and not just because of the deadlines set by legislators.
Source: IKB Deutsche Industriebank

The aluminium industry’s key role in improving sustainability

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