BRAZIL ALUMINUM PRODUCTION

BRAZIL IN THE WORLD TOP IN PRIMARY ALUMINUM PRODUCTION

Brazil has positioned itself as one of the world’s leading primary aluminum producers. This production has become evident over the years, and the industry continues to grow. Now, aluminum manufacturers are analyzing their results for this year and establishing new estimates.

Despite both internal and external obstacles, the sector within the investment market will spend close to 30 billion Brazilian reais by 2025. The Brazilian Aluminum Association (ABAL) expects to reduce its procurement to 4%, higher than the original forecast of 2.3%. This contrasts with the unprecedented increase experienced throughout 2021 when domestic aluminum purchases reached a record high of 1,583 tons.

Janaina Donas, a former ABAL representative, explained that there was a decrease in orders during the second half of last year, which accentuated the drop in consumption. By the end of 2020, the market is forecast to have decreased in volume to 1,520 tons.

The Brazilian president spoke about the importance of the country’s re-entry into the world primary aluminum market with the aim of restarting the Maranhão Aluminum Consortium, a facility that was halted in 2015 and has an estimated annual production capacity of 447,000 metric tons.

Janaina was optimistic about the future of Brazilian metal production, saying that they could improve in the world ranking of producers from 12th place to enter the top 9 or 8, which would allow them to exit the framework as mere net importers of metal.

The aluminum manufacturing sector in Brazil celebrated at the end of 2022 the Brazilian government’s decision to tax imports of Chinese aluminum rolled products, after proving subsidies from that country to exports to Brazil.

According to the head of ABAL, the adoption of trade defense instruments is a legitimate action, recognized by the World Trade Organization (WTO), and fundamental for correcting imbalances caused by unfair practices.

In 2022, the International Aluminium Institute (IAI) published a survey showing that demand for primary aluminum is expected to grow by 40% by the end of 2030, which will drive the global industry to produce an additional 33.3 million tons of metal per year.

In the total increase, the four main areas of consumption (Transportation, Packaging, Construction and Electrical Sector) will have a contribution of up to 75%.

The unique properties of metal, coupled with the sustainability offered by the recycling cycle, has led to a growing interest in this material. Of the 1.5 billion tons produced to date, it is estimated that at least 75% is still in circulation. This demonstrates the unlimited possibilities and the effectiveness of the recycling process in maintaining existing levels.

According to ABAL, the contribution to the domestic market for the period between 2021 and 2025 will total 30 billion reais. A sum of resources will be granted by the industry in order to execute a variety of projects, among which the following stand out: the production of primary aluminum, construction and renovation of plants, expansion of bauxite reserves, own energy production, modernization and implementation of collection and recycling centers, agreements with the academic sector to undertake initiatives related to Research and Development (R&D).

At the beginning of production, Mineração Rio do Norte continued to work with sustainable mining activities within the Amazon. This is demonstrated by its bauxite extraction as the first link in the production chain.

The company is aligned with international standards such as ASI Performance Standard, International Finance Corporation (IFC) and Global Industry Standard for Tailings Management (GISTM) certifications, in addition to sustainability and ESG practices.

Guido Germani, CEO of the company, mentioned that the challenge they are working on is called the New Mines Project. Its objective is to ensure the production of 12.5 million tons of bauxite over the next twenty years. To achieve this, they will have to go through a process known as licensing.

“The PNM has investments of around R$ 900 million and, for us, it also represents the continuity of promoting the sustainable development of the region, maintaining and generating jobs and corporate social responsibility projects, including educational initiatives that have already transformed the lives of thousands of people,” he detailed.

In 2021, more than R$23 million was invested in socioeconomic and environmental actions in the region. The PNM also foresees the generation of taxes and foreign exchange for the municipalities of Oriximiná, Terra Santa and Faro, as well as for the State of Pará.

In 2019, Albras, an aluminum producer at parent company Hydro and Nippon Amazon Aluminum (NAAC), had a satisfactory year thanks to nearly R$530 million injected to modernize its infrastructure and consolidate its production strategies with lower environmental impact.

The company is investing, for example, in strategic renewable energy generation through participation in solar power plants and hydroelectric power plant energy contracts in Brazil.

During 2021, the production of silicon alloy called PFA made by Albras has experienced a large increase over the past two years. This alloy is used in the automotive industry to manufacture tires and different components required for vehicles.

“What we can assess is that the primary aluminum market was very volatile in 2022 for several reasons, such as the war between Russia and Ukraine, and the consequent impact of reduced Russian gas exports, generating an energy crisis in the European Union. The post-Covid growth expectations in the West and the persistent policy of confinement in Chinese territory have also added additional doses of uncertainty about the real growth of the economy, which in turn have impacted the dynamics of consumption transactions and inventory replacement,” said João Batista Menezes, president of Albras.

According to the leader, it is still too early for a forecast of the primary aluminum sector for 2023: inflation in the United States is lower than expected and this moves the market, because the country is a large consumer. Europe, on the other hand, has a large market share and has been negatively affected by the war between Russia and Ukraine.

“What we can say is that Brazil is well supplied with aluminum. In terms of investments, throughout 2022 we had and still have ahead of us several projects that will be fundamental to keep Albras updated in relation to the best technologies in the market, as well as projects that definitively address the stability of our processes making the company more productive and competitive,” he remarked.

Novelis has experienced that the production of its products made with aluminum laminates has been reduced due to the changes that are happening in both local and global spheres.

“The beverage can segment has been growing at an accelerated pace in Brazil in recent years, due to product diversity, increased packaging efficiency and environmental responsibility. However, 2022 was a big challenge and the resumption of the bar and restaurant sector led to a drop in the share of aluminum cans in the packaging mix for the beer segment,” explained Solange Akiama, the company’s senior manager of Commercial Excellence and Marketing.

Despite this, the company continues to invest. In less than five years, R$1.2 billion was directed to expanding the company’s production and recycling capacity. Last year, Novelis approved a new R$ 450 million package to further increase production capacity by 2024 at the pindamonhangaba (SP) plant, considered the largest aluminum rolling and recycling complex. In addition, the company intends to spend more than R$4 billion to build a new plant next to the current one.

“We also invested in the installation of a Customer Solutions Center (CSC), an innovation center focused on developing more sustainable solutions for our beverage can customers that will open in the first half of 2023,” he added.

The aluminum sector is expected to perform better for the electricity sector if everything works as planned. However, demand from other specific sectors will largely depend on economic development within the country. This evaluation is performed by a professional expert in the area.

Michelle Avila, who heads trade and international logistics at AMG Brazil, explained that last year had already been a great achievement for the sector and 2021 would be an even better year with increased exports and a very excited Brazilian market.

“This caused market demand for aluminum alloys and specialty alloys to slow to production levels three to five years ago. However, this reality is cyclical and the expectation for 2023 is very challenging and improving in the global economy,” Michelle added.

Precisely, AMG Brazil decided to take a step forward, despite the coronavirus situation, to improve its capabilities and reach new markets. This included the renovation and modernization of all equipment using 4.0 paradigm technology.

The corporation is looking to better position itself over the next five years with a series of investments. These must take into account components such as safety, efficiency, reliability and quality improvement so that they can adapt to market requirements.