Group Aluminium
Canada ‘needs to increase aluminium capacity’
(Minews) - Aluminium producers in Canada must boost capacity to serve markets in the USA and Europe ahead of a free-trade agreement between Canada and the European Union, according to the head of the Aluminium Association of Canada.

Canadian aluminium now faces EU tariffs of 2 to 7 percent, but those barriers will be removed once the agreement comes into force, likely by 2016, association president and general manager Jean Simard told Metal Bulletin sister title AMM in an exclusive interview on April 1.

That means the Canadian aluminium producers’ market will expand from 300 million to 400 million consumers in the USA to about 1 billion consumers as the use of aluminium expands in several sectors, most notably in the automotive industry, Simard said.

“It is important for us to increase our production capacity to take advantage of this additional market [Europe],” he said on the sidelines of the Aluminium Association’s spring meeting in San Antonio. “We would be fools not to give ourselves the capacity to play in this new market (Europe). ... As time passes, if you don’t stake your territory someone else will do it.”

If Canadian producers do not expand capacity then they will be able to serve Europe only at the expense of customers in the USA, Simard said. “That’s like four quarters to a dollar. It’s zero sum. And we don’t want that.”

But to expand production – all of it likely at brownfield facilities in Quebec – aluminium producers will need to receive lower power rates to compete with Middle East suppliers that benefit from low-cost energy and US companies that take advantage of cheap shale gas, Simard said.

That means power rates will have to drop from 4.7 cents per kilowatt hour (kWh) to 2.7 cents or less, he said.

“If it’s not (2.7 cents per kWh), it’s not sustainable,” he said, noting that higher prices might justify maintaining facilities but would not allow for adding new capacity.

There is unlikely to be any new capacity added before 2016 – and perhaps not even in 2017 –given forecasts of low aluminium prices for two to three years and big warehouse stocks, Simard said. That means the task at present is to get electricity agreements in place to make future expansions possible, he said.

The expected growth likely would happen at Aluminerie Alouette – the largest aluminium plant in the Americas – in Sept-Îles, Quebec, and at Montreal-based Rio Tinto Alcan plants in the Saguenay-Lac Saint Jean region of Quebec, Simard said.

Alouette, for example, could boost capacity to 900,000 tonnes per year from about 600,000 tonnes currently if a favourable power deal is reached, he said.

Rio Tinto Alcan owns dams that provide the company with hydroelectric power, but new capacity would require it to buy electricity from outside its system, Simard said, underscoring the necessity of securing a lower power price.

The Aluminium Association of Canada represents the three major primary producers with operations in Canada – Pittsburgh-based Alcoa, Rio Tinto Alcan and Alouette – and their nine smelters. About 80 percent of their total capacity is exported to the USA.
Publish date : Friday 11 April 2014 01:50
Story Code: 6438