Brazil's aluminium industry is further enhancing its sustainability by boosting renewable energy use and recycling, while mitigating risk from high-carbon imports
The post Brazilian aluminium industry plans further decarbonization appeared first on Fastmarkets.
Brazil’s aluminium industry already has carbon-emissions levels that are significantly below the global average, but it has plans for further cuts in these emissions by increasing the use of renewable energy and more recycling, Fastmarkets has heard.
The Brazilian sector will also keep a close eye on the volumes of potential high-carbon material being diverted from Europe.
Market participants discussed the industry’s decarbonization during panels and on the sidelines of the annual Brazilian aluminium conference in São Paulo, held under the title “9th International Aluminium Congress.”
One of the topics to be discussed was how Brazil could react to the European Union’s introduction of its Carbon Border Adjustment Mechanism (CBAM).
“CBAM can change the dynamics of foreign trade, and we must know how to act, being a developing market and already having low emissions,” the executive president of the Brazilian aluminium association (ABAL), Janaina Donas, told Fastmarkets on Wednesday April 10.
“We need both offensive and defensive action,” she added, “developing our own carbon market with the bill currently in Congress, while protecting our market from trade inflows of higher-emissions material.”
The Brazilian aluminium industry emits around 4.5-6.5 tonnes of carbon equivalent emissions per tonne of primary metal produced, according to ABAL. This compared with a global average of 15-16 tonnes when considering the “cradle-to-gate” calculation – almost 65% lower.
The greatest fear among industry participants in Brazil was that the country’s decarbonization efforts might have no answer to CBAM and other trade barriers across the world, opening the possibility of cheaper, “dirtier” material being imported from other regions, which would also result in an excess of local material.
“Studies show that the best alternative for Brazil, alongside regulating our own carbon market, is establishing a ‘cap-and-trade’ mechanism as a carbon border barrier,” Donas said.
Meanwhile, the industry is moving forward with new emissions reduction measures. Aluminium producer Hydro’s subsidiary Hydro Rein, for example, has developed a solar-power plant jointly with Equinor and Scatec. Last month, this started to power Hydro’s Alunorte alumina refinery.
Hydro Rein is also developing a hybrid solar and wind power project to supply energy to both its Paragominas bauxite mine and to Alunorte.
Both projects will allow Alunorte to switch to natural gas from heavy fuel oil and to stop using coal, by installing electric-powered boilers at the refinery. This will cut Alunorte’s carbon emissions to 0.2 tonne of CO2 equivalent per tonne of alumina produced by the end of 2030, from around 0.65 tonne currently.
“There has to be a market premium for this greener material,” Hydro’s bauxite and alumina chief operating officer, Carlos Eduardo Neves, told Fastmarkets on the sidelines of the Brazilian aluminium conference. “This is how the investment will be recognized.”
Brazilian aluminium producer Companhia Brasileira de Alumínio (CBA) has invested 115 million Reais ($22 million), and inaugurated a new scrap treatment line at the beginning of this month in the Metalex division in São Paulo. It now intends to increase the recycled content in its products in the next few years, Roseli Milagres, the company’s director of supply chain and procurement officer, said during the conference.
The new line can work with different aluminium alloys and with cleaning of contaminants. The company is also developing its own scrap collection center.
With these operations, the recycled content of CBA’s billet production should increase to 80% from 60%. The company also expects to increase its secondary production, Milagres said.
The industry is moving in the same direction as measures already announced by the government to improve the recycling chain.
According to the Brazilian Ministry of Environment and Climate Change (MMA), the maturity of companies in the metals sector made the government want to “raise the bar” in its solid waste policies, by tightening the regulation of reverse logistics, with rules that oblige the industry to collect the waste it produces.
Currently, 60% of all aluminium produced in Brazil is recycled, according to Adalberto Maluf, National Secretary for Urban Environment and Environmental Quality. In terms of aluminium cans, 90% are recycled in Brazil. “It’s probably one of the sectors in the country that recycles the most,” he said.
But he added that fewer than 30% of the industry participants that contribute to metal recycling are actually represented in financial terms under the current accounting scheme.
“The electronics sector pays a high cost for reverse logistics, and suffers from unfair competition from imports that pay nothing, and from other actors in the sector [which have not yet regulated their recycling systems],” Maluf said.
According to Maluf, 300 million Reais was reserved from the national budget in 2023 for a project that provides a deduction in income tax for people and companies that support recycling projects approved by the ministry. This would be along the same lines as are now being followed in the culture sector in Brazil, with the so-called Rouanet Law.
Once the solid waste project is fully operational, importers would have to comply too. This would come in the form of import declarations attesting that the company buying foreign material is adherent to the reverse logistics policy too, the secretary said.”
The government is also working on a national pact for the end of dumping, with investments in cooperatives and urban recycling structures. The intention is to increase the remuneration for cooperatives and collectors, considering the environmental service provided, Maluf said.
Increasing scrap usage is a way for the industry to reduce costs and to be less open to price volatility in markets such as the London Metal Exchange, for example. According to the chief executive officer of CBA, Luciano Alves, using secondary aluminium guarantees higher margin stability for that reason.
Fastmarkets’ assessment of the aluminium P1020A premium, low-VAT market, delivered São Paulo region, was $220-250 per tonne on April 2. This widened upward up by $10 per tonne from $220-240 per tonne a fortnight earlier, but was a return to the level on March 5, when it was first published.
Besides the benefits for costs, increased use of recycled materials would help companies to reduce their environmental impacts.
CBA currently has an emissions level of 2.97 tonnes of CO2e per tonne of products manufactured, and expects by 2030 to reach 1.4 tonnes of CO2e per tonne produced at its the Metalex unit. “Other producers in the market have emissions 3-4 times higher than our current level,” Alves said.
Milagres also made note of the growing demand for aluminium in sectors that are key for decarbonization, such as light commercial vehicles, electric vehicles and hybrids. Such vehicles, she said, use 40% more aluminium than internal combustion-powered alternatives.
To understand the complex market conditions influencing price volatility, download our monthly base metals price forecast, including the latest aluminium price forecasts today. Get a free sample.
The post Brazilian aluminium industry plans further decarbonization appeared first on Fastmarkets.
