The aluminum industry is one of many sectors working to decarbonize. While the industry has a number of means by which to reduce its carbon intensity, increased scrap consumption will play an important role, which should benefit scrap demand in the long term.
New investments in scrap-based aluminum production in the U.S. are underway:
- Atlanta-based Novelis is investing $2.5 billion to build a recycling and rolling plant in Bay Minette, Alabama, which it broke ground on last fall. Novelis says the plant initially will have the capacity to produce 600,000 metric tons of finished aluminum goods annually.
- In April of last year, Norway-based aluminum producer Norsk Hydro ASA broke ground on an aluminum recycling plant in Cassopolis, Michigan, designed to produce some 120,000 metric tons of aluminum extrusion ingot per year, using 75 percent postconsumer scrap, according to Hydro.
- In November 2022, Steel Dynamics Inc. (SDI), based in Fort Wayne, Indiana, announced a $1.9 billion greenfield recycled-content flat-rolled aluminum mill in Columbus, Mississippi, that will operate under the name Aluminum Dynamics. SDI says the mill will require approximately 900,000 metric tons of aluminum slabs annually, nearly 50 percent of which will be provided by furnaces on-site. The remainder will be provided by two satellite recycled-content aluminum slab centers the company plans to build in the southwestern U.S. and in north central Mexico.
These investments are in addition to the investment secondary aluminum billet producer Metalco has made. The company recently opened its Franklin, Kentucky, facility, which began producing secondary aluminum ingot slabs in December 2022. The Brampton, Ontario-based company invested about $65 million in the new facility, which can produce 135,000 tons per year, and plans to further increase capacity to 195,000 tons per year.
On its website, Metalco speaks to the advantage its scrap-based production offers, stating it “is proud to have achieved one of the lowest-carbon footprints for aluminum billet and rolling slab production, with its billet and slab produced at one-eighth of the carbon footprint of most primary products—and less than half of the footprint for hydro-powered primary production.”
Building on its history
Matt Meenan, vice president of external affairs at the Aluminum Association, Arlington, Virginia, notes the aluminum industry in North America has a history of reducing its carbon dioxide emissions, though momentum has increased in the last three to five years in response to pressure from customers and consumers.
According to a third-party critical-reviewed life cycle assessment report prepared by the Aluminum Association’s (Marshall) Jinlong Wang and released early last year, since 1991, the carbon footprint of primary aluminum production in North America declined by 49 percent, while the footprint of recycled aluminum production dropped by 60 percent.
Meenan says many factors have contributed to the North American aluminum industry’s reduction in carbon intensity, including the use of hydropower by primary smelters in Canada. However, he adds, “I think our recycling story is part of the story, and then there’s also been general process innovations that we’ve seen across the sector.”
Europe’s aluminum industry has a similar track record, Meenan says, though aluminum production in China and the Middle East has a higher carbon intensity.
Too big a job for scrap alone
Hydro Chief Technology Officer Hans Erik Vatne says decarbonization is a key priority at the company. To achieve its carbon-reduction goal, Hydro has a three-part road map that includes increasing its use of recycled content, using more renewable power at its existing smelters and opening new primary smelters that use new technology.
Hydro’s Circal is a low-carbon recycled aluminum product that contains at least 75 percent-postconsumer scrap. Vatne says postindustrial scrap is not used in Circal—only end-of-life postconsumer scrap—which is certified by a third party.
Hydro’s Commerce, Texas, site became the first of its U.S. sites to be certified by DNV, an independent risk management and quality assurance company based in Oslo, to produce Circal in May of last year.
He says the company has been able to increase postconsumer scrap use because of innovations in sorting technology, specifically the introduction of laser-induced breakdown spectroscopy (LIBS).
LIBS is a technology used for elemental analysis that measures the concentrations of the alloy elements copper, ferrous, magnesium, manganese, silicon, zinc and chromium. It aids in the separation of multiple aluminum alloys from mixed aluminum scrap.
Hydro has made aluminum from 100 percent-postconsumer scrap, Vatne says. However, that aluminum was made using natural gas. The company is investing to see which alternative to natural gas, including hydrogen, biogas and plasma, makes the most sense to use from an economic perspective.
Decarbonization pressure
While aluminum producers are feeling pressure to decarbonize from all their key markets—automotive, building and construction and packaging—Meenan says the beverage can market is exerting considerable influence. “And I think one of the big reasons for that is it is so consumer-facing” and visible, he says, whereas aluminum accounts for only a percentage of a vehicle and is hard for people to visually distinguish from steel.
That pressure from the beverage can market can be seen in the Washington-based Can Manufacturers Institute’s (CMI) push to increase the recycling rate for used beverage cans (UBCs). The CMI’s members, which make beverage cans and aluminum sheet used in cans, want to increase the UBC recycling rate from the current 45.2 percent to 70 percent by 2030, 80 percent by 2040 and 90 percent by 2050. (See “Boosting the economy, environment and supply chains” on Page 120 for more information on this initiative.)
One of the ways they have proposed to do so is by supporting “recycling refunds,” Meenan says, referring to what has traditionally been called container deposit programs. “We do see that as the best way and the only proven way to dramatically raise recycling rates,” he says. “So, it’s something the industry is pretty committed to at this point.”
While decarbonization of the aluminum industry eventually will come down to the energy used in the production process, Meenan says, the use of scrap plays an important role as it reduces aluminum producers’ energy requirements by 95 percent. “If you increase the aluminum recycling rate by 1 percent, you reduce your overall carbon footprint by 80 kilograms of CO2 per 1,000 kilograms of aluminum produced, and that’s about 200 miles driven in a gas-powered car,” he says. “That doesn’t sound like a lot, but when you spread it out over millions and millions of tons that we’re making, it’s actually quite a bit of carbon. So, raising the recycling rate is really critical.”
The aluminum industry is incentivized environmentally and economically to increase its use of scrap, Meenan says. “I think the challenge for us going forward ties back to trying to get those recycling rates up and get more of that can sheet back,” he adds. “But I think one of the challenges for us going forward is going to be finding the metal that we need for these new facilities. … And I don’t know that we figured it out.”
Digging more deeply into the urban mine
While domestic demand for aluminum scrap softened in the fourth quarter of last year and remains reduced in the first quarter of this year, long-term demand is poised to increase based on investments that have been announced.
“There’s going to be huge, insatiable demand for scrap once all these new capital projects get into full production, assuming the economy and consumer demand is very strong,” says Chad Kripke, president of Kripke Enterprises Inc. (KEI), Toledo, Ohio. But, in the short term, mills have inventories that need to be offloaded.
Kripke and Andy McKee, who is the Trading Division president for Kalamazoo, Michigan-based Schupan & Sons Inc., say supply chain disruptions last year caused mills to overbuy.
“It’s strictly because all of these supply chains that had been stressed last year, and the overordering that took place in order to get a hold of what you needed to feed your operation,” Kripke says. “It finally all came home to roost, and now there’s a logjam of inventory. All the late deliveries are now piling in, and everybody needs to work through their large inventories. People are also reluctant to build inventory at a higher interest rate.”
McKee says he expects aluminum scrap demand to be flat to somewhat down through the end of the second quarter of the year based on what he’s hearing from the domestic consumers that Schupan supplies.
Kripke also thinks the domestic market will remain muted through at least the first half of this year, which is “forcing a lot of metal to go overseas” in the meantime. “Hopefully, in the early second half of this year, things will begin to reach an equilibrium.”
In terms of how the new aluminum mills will affect scrap demand, Kripke says Hydro’s Michigan mill will be looking for shredded extrusions. “That’s going to be a pretty limited appetite,” he says. “However, that’s going to rob from the mouths of the secondary smelters that normally would rely on extrusions for a sweetener.”
The Aluminum Dynamics and Novelis mills, which plan to produce can and automotive sheet, likely will pursue closed-loop arrangements with automotive stamping plants and original equipment makers (OEMs), Kripke says, while UBCs will be used as fillers by everyone. “But you can’t necessarily use a lot of UBCs in production of some of these high-quality items,” he adds.
McKee says investments will have to be made at multiple levels of the supply chain to make the best use of the aluminum scrap that is available. “It’s going to take investments from scrap processors like Schupan that can add value to the scraps to a point that consumers can handle it. And then they’ll have to take the football from there and make investments at the mill level where they can maybe value add that scrap further before they get it into their operation for their furnaces.”
Regarding what Schupan is doing to prepare for the anticipated increase in aluminum scrap demand, McKee says, “What I can tell you is Schupan is certainly invested in helping our customers or the consumers that we sell to and by proxy the OEMs and the brand owners that are selling products to the marketplace. We’re committed to helping them meet their sustainability goals.”
He says that could involve investing in shredding, sorting, melting and processing capacity. “We’re looking at all of those buckets right now and assessing what fits our geographical footprint, our processing footprint,” McKee adds. “We know what we’re good at doing. So, where can we align and serve the market with more units for metal?”
“We are definitely in the process of listening to where the needs are now and where they’re going to be for our customer base, both on the dealer side and the consumer side,” Kripke says of KEI.
“We are always looking to grow and increase our presence,” he adds.
Once these new mills are running, Kripke wonders how existing supply chains will be affected: “What is the competitive landscape going to look like? I think that the industry will have to adapt rather quickly when this all steps in place. And it’s going to be really interesting to see how it plays out.”
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