Technological advancements key to China's aluminium sector's path to net-zero emissions

The world's second-largest economy, China dominates the global primary aluminium production, holding a staggering 57-58 per cent share of the market. However, China's aluminium industry significantly impacts its carbon footprint, contributing approximately 5 per cent to its total emissions. Consequently, aluminium producers are compelled to assist China in achieving its ambitious net-zero targets by 2060.

According to the World Economic Forum, compared to regions like Europe, the high carbon intensity of aluminium production in China can be attributed to its heavy reliance on coal-fired energy, which accounts for over 80 per cent of its energy sources. However, achieving low-carbon aluminium production in China necessitates more than a mere transition to renewable energy. It requires the implementation of decarbonization technologies that effectively tackle the direct emissions associated with aluminium processing in a manner that is both scalable and commercially viable.

A study conducted by Accenture and the World Economic Forum in April 2022 outlined the different technologies required for decarbonizing the aluminium industry, their current level of advancement in China, and the obstacles hindering their commercial viability. To significantly reduce emissions from processing within the next 40 years, aluminium producers must adopt a range of technologies in the short, medium, and long term. These technologies encompass various aspects, such as enhancing recycling capabilities and advancing hydrogen development. If successfully implemented, these measures could lead to a 65 per cent decrease in emissions from the aluminium industry.

China has recently embarked on the development of a closed-loop recycling system. However, there is a need to achieve a higher percentage of scrap recovery and reuse to enhance its effectiveness. Furthermore, efforts must be made to improve the quality of secondary aluminium, thereby expanding the range of end-use possibilities and avoiding any limitations.

Enhancing the collection, sorting, and utilization of aluminium scrap can significantly reduce the carbon footprint of the entire industry, as recycled or secondary aluminium generates only about 5 per cent of the emissions compared to primary aluminium.

China's dominance in the global secondary aluminium market continues to strengthen, with a market share of approximately 35 per cent, and this share is steadily increasing each year. However, it is worth noting that the demand for secondary aluminium in China remains relatively low, accounting for only 16-20 per cent of the available material.

Nevertheless, the demand for secondary aluminium in China is expected to experience significant growth in the future. This anticipated growth is attributed to a government-imposed capacity limit on primary aluminium production, which will encourage the industry to focus on secondary aluminium production. As a result, two of China's leading aluminium players, Hongqiao and Nanshan, are already showing interest in secondary aluminium production and signalling a departure from the dominance of regional organizations with smaller market shares.

Downstream industries, including auto manufacturers and consumer goods companies, are already pledging to incorporate recycled aluminium into their products due to its lower production costs in China, which are approximately $900 per tonne less than traditional production methods. This cost advantage, coupled with the anticipated growth in global demand, is expected to contribute to increased profitability in the recycled aluminium sector.