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Hot topic green aluminium: Whirlpool of misunderstandings

14 December 2020
 |

The London Metal Exchange (LME), the world’s leader in trading industrial metals from aluminium to zinc, has been applauded as well as strongly criticised for the mere idea to propose a new spot market trading platform for sustainably produced metals. For the 143 years old exchange it was sufficient to issue a discussion paper on metals to find itself in a mess, a kind of whirlpool of misunderstandings. Not even waiting for the LME’s response to all the answers and proposals to this discussion paper, some people went public with their own conclusions.

But they have misunderstood or misinterpreted what-ever the LME is planning and perhaps might be trying to implement. LME-CEO Matthew Chamberlain stresses: ”We have made it crystal clear that we do not think that carbon is the holy grail of sustainability. We have taken a broader approach. That’s why, when some players called for a low carbon contract, we said no. We want to take a far more holistic approach”.

Metals as an essential enabler of a sustainable future

According to Chamberlain, the LME has learnt, that sustainability is becoming more and more important to its stakeholders. Having successfully implemented responsible sourcing for metals, now the exchange is trying to put that in an even broader perspective on metals as an essential enabler of a sustainable future. Aluminium, of course, is the number one traded industrial metal at the LME. But the idea to launch a separate spot trading platform was prone to be hotly debated. Hilde Merete Aasheim, the CEO of Norsk Hydro, fears that the LME will set a far too low threshold for green aluminium. The Norwegian flagship company, globally one of the biggest integrated aluminium groups, can rightly claim that Hydro produces much greener aluminium than some competitors.

There are other European aluminium groups calling themselves green. Alvance, in which the British-Indian metals magnate Sanjeev Gupta has pooled the aluminium companies he acquired for GFG Alliance, is one of them. Alvance just announced to invest in its Fort William’s facility in Scotland in a new recycling and casting plant, using hydropower and thus securing its future as a “Green aluminium” hub. In a new venture for the group, GFG Alliance plans a new water canning facility, located near the Fort William aluminium plant, to package Scottish Highland water in recyclable aluminium cans. Thus, providing an alternative to plastic bottles, the famous water can be sold beyond Scotland in British and international markets. Alvance in Dunkirk, Europe’s biggest aluminium smelter, which Gupta had taken over from Rio Tinto, is using French nuclear power.

“The concept of green aluminium is being hijacked for economic benefits”

Globally, there are quite some more groups with green credentials. Alcoa, the U.S.-market leader, claims to have developed the industry’s first low-carbon, smelter grade alumina brand, EcoSourceTM, adding a new line to a range of low carbon aluminium products called Sustana. Alcoa President and CEO Roy Harvey proudly stresses: ”Our leadership in sustainability is represented with emissions measured throughout the process. Now, aluminium is created equally and our mine-to-metal approach is a key differentiator for these products”. He obviously is on the same line as Hydro’s Ms Aasheim, who is “a little bit afraid” that by opening a new trading platform for low-carbon aluminium the LME “will commoditise a specialised product”. Other leaders in the international aluminium industry are warning that a potential focus on the kind of energy to produce the aluminium ran the risk of overlooking other issues in the supply chain. Satish Pai, managing director of Hindalco Industries, the big Indian conglomerate, suspects: “The concept of green aluminium is being hijacked for economic benefits by a few companies”. Pai is asking for a more “holistic environmental and sustainable point of view across the whole value chain”.

The latter is one point, Chamberlain likes to make. According to his observation “the first thing, that all agree on, is that everybody has a different view of sustainability.  And that’s why the LME is keen to embrace a broader picture of sustainability. A lot of people have different views, whether hydro power is better than wind power or vice versa or what the thresholds are, there is no common vision of carbon footprints. The last thing we could want to do is to go out and say this producer is green, the other one greener or less green… There is no standard for carbon emissions. it is not our intention to set out a green standard”.

The misunderstandings may be even down to the COVID-19 pandemic. Chamberlain had no real opportunity to explain in public properly the LME’s true intentions. And long before he could give his thoughts and comments about the responses to the discussion paper, others claimed to know in detail what the LME would do and some started to fight against it. Chamberlain tries to make it clear: The LME is not proposing an aluminium standard for low carbon, just planning to offer a platform, where people can trade the metal voluntarily disclosing the carbon footprint and other ethical assets. And they either convince the buyer or not. If this wouldn’t work, nobody would use the platform. If the LME has got it wrong, it will be irrelevant. If the exchange has got it right, this will help the industry to cope with one of the huge challenges in our time. The LME is not setting a standard, not for aluminium nor for any other metal. But Chamberlain doesn’t like the idea, that the LME should stand on the sidelines. Instead, he wants the exchange to do help producers on a voluntary basis to disclose sustainability aspects around their product, apply appropriate verification, so that people can trust the information that’s there. Chamberlain is passionate about ethical information, of finding a way to bring these to the market and help to build back a better world.

    

Author: Dr. Katharina Otzen-Odrich

    


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