Aluminium has challenges in short term but a ‘great future’ – Alcoa’s Harvey

The aluminium industry in Europe is going to have a difficult winter and there is a "great cloud of uncertainty", Roy Harvey, president and chief executive officer at Alcoa, has said

Speaking at the Fastmarkets International Aluminium Conference on Tuesday, September 13, Harvey said that high energy prices continue to add to the uncertainty and volatility we see in today’s market. And although the aluminium industry will face some challenges related to this in the short-term, long-term demand will still be strong.

As it has been a much interesting end of summer, it’s going to be an interesting fall. It’s going to be a very difficult winter in many ways. We’ve seen weak patches [in demand] and uncertainty, but at the same time, I think there is still a very strong case to say aluminium has a great future. It has got challenges in the short term, and we need to see how that plays out.

Roy Harvey, Alcoa

High energy and electricity costs in Europe have taken a number of smelters offline this year. In August, Alcoa announced that it was going to reduce production by one-third at its Lista smelter in Norway.

It said that about 65% of Alcoa’s global smelting portfolio was currently powered under long-term energy contracts linked to aluminium pricing on the London Metal Exchange.

About 30% has either fixed-price or self-generated pricing, but the remaining percentage was exposed to short-term markets – and this included the Lista smelter.

“On the supply side, it is a very difficult time to do business inside of Europe in any industry because of the price of energy,” Harvey said.

“We have a couple of places where we’re exposed to spot energy in Europe and we spent a vast majority of our time trying to think what we do in order to offset that, and deal with it and to make sure we’re making smart decisions on each of these facilities,” he added.

Harvey said that they see a tight energy market across Europe, particularly in Germany, but there is no clarity on what will happen next.

“We can’t predict what tomorrow’s going to look like – you wake up and you look at the headlines to see what terrible things have happened or what great things have happened overnight,” Harvey said.

Despite cuts at smelters, the high energy costs and recession fears are impacting spot demand and pushing European aluminium premiums lower.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam, at $420-460 per tonne on Tuesday – down significantly from the all-time high of $600-630 per tonne in May this year.

But Harvey said Alcoa are continuing to see consumers want metal.

“It’s the metal of the future – it’s a metal that has sustainability built in and recyclability,” Harvey said.

“Our customers are strong. Although there is so much uncertainty in Europe that it is hard for them to have a view on their order book out further than the next few weeks and next couple of months,” he concluded.

#FastmarketsIA

What to read next
The aluminium market in China was expected to come under massive demand from the new energy vehicle (NEV) sector in the years ahead, but the aluminium industry still faced various challenges in the application of the metal in NEVs, Fastmarkets has learned.
The German auto-manufacturer BMW opened its first press shop in North America at its plant in Spartanburg, South Carolina, where it will produce the exterior for its X3 model, the company announced on Friday June 21
China’s exports of refined copper rose to an eight-year high in May, with exports expected to stay elevated through June, sources told Fastmarkets in the week to Friday June 21
Saudi Arabia, through its spearheading of a mining and minerals production and consumption push in the Middle East, a region usually associated with oil and gas, is leading neighboring countries to increase their presence in the base metals markets
Indonesia is preparing to invest more in its aluminium supply chain as part of its wider critical metals strategy, Fastmarkets understands
Market sentiment remain mixed on whether the investigation will impact aluminium prices and production