Since the 2008 economic crisis around two million tonnes of aluminium production have been closed in Europe, despite global production rising by ten million tonnes as it is supported by the growing industry in the Middle East and Asia. By October of this year it is expected that the European Commission will complete a review of new policy to help the struggling industry, looking specifically at long-term power contracts and import duties.
Known colloquially as an industry ‘fitness check’, the reports will consist of an in-depth assessment of the impact of European Union policy on aluminium, particularly in terms of climate, energy, industrial policy, competition policy and more.
Fabrizia Benini, cabinet member in the office of the EC vice-president for industry, hopes that the report will result in strategy for growth:
“Just because a (competing) country has cheaper labour and less stringent climate rules doesn’t mean that all industry should leave Europe. If Europe can produce in a cleaner manner, it’s better for the environment and better for growth.”
One of the key challenges facing the European aluminium industry is energy. Electricity accounts for 30-40% of the cost of producing aluminium, and this cost cannot be passed to the consumer because aluminium is priced globally on the LME. The comparatively higher electricity and labour costs faced by European producers compared to their Asian or Middle Eastern counterparts put them at a competitive disadvantage.
To counter this, state aid is available to the aluminium industry to compensate for the higher energy costs which are indirectly caused by the European Union’s Emissions Trading Scheme, a scheme which exists to cut carbon emissions. However it is said that the aid is not extensive enough to turn the decline in the industry around, and more help is needed.
We will track the results of the European Commission’s ‘fitness check’ with interest, and look forward to the October deadline.