The Aluminum Supply chain

Aluminium, or as Americans call it, aluminum, is a chemical element (Al). In today's modern industrialized world, the human population is heavily dependent on this commodity. We use it for our buildings (such as cladding, windows, and door frames), for transportation (including manufacturing cars and their parts, trucks, buses, aircraft, ships, and rails), and for home appliances (such as fridges, washing machines, vacuum cleaners, ironing boards, and lawn mowers). It is also used in heating and cooling ventilation ducts in air conditioning systems. In our kitchens, aluminum is used for packaging and food wrapping (like aluminum foil and cans). In the electrical and communications industries, it is used in transmission towers, mobile towers, solar panel frames, electrical conduits, superconductors, and capacitors. Additionally, it is utilised in utensils, industrial lightweight machines, road signs, and more.

Population growth is predicted to reach 9.7 Billion by 2050, And the majority of the population growth is expected to be contributed by Africa and Asia.

If you look at the table below, I have used most data available from various sources and calculated an estimated aluminium consumption forecast based on the aluminum consumption until 2020, and the population growth forecast from Global Change Data Labs part of Oxford University UK. More importantly, the data is in the ballpark estimates of most global mining and metals market forecast reports.

Aluminium demand is expected to reach 146 Million tonnes in the year 2050 to support the population of 9.7 Billion on the planet. Most of the growth in demand will be from Africa and Asia, while the Western economies will target steady consumption in contrast to the new population.

So where do we source this product from?

Yes, technology is advancing exponentially, and so is the demand for this product, as it is considered an enabling metal of future technologies, this metal is lightweight, durable, and cheaper than its equivalent products.

The majority of the production of aluminium in 2020 came from a few countries mainly China, India, Russia, Canada, and UAE, more importantly, China produced nearly 10 times as much aluminium as the second highest producing countries. Of this, 20%? was consumed by the automobile industry.

A key point to note is that aluminum smelters, alumina refineries, and bauxite mines are often located far from each other. Bauxite is predominantly found in subtropical to tropical regions, with major deposits located inland, away from urbanized areas suitable for mining operations. Refineries are usually situated on the coast to facilitate the import of raw materials like caustic soda and other energy resources via sea routes. In contrast, aluminum smelters are typically located near energy-producing sites such as hydroelectric, gas, and diesel-powered electrical power stations, as smelting is the most energy-intensive process in the entire aluminum supply chain.

The Demand for this commodity is intense based on the trajectory of population growth of the planet and the consumption of this metal is not set to slow down. Although this product is recyclable, unfortunately, the recycling industry will not be able to taper the demand.

Given the global market demand for aluminum, the upstream industry, which relies on natural resources, faces significant challenges and long lead times to bring products to market, leading to a scarcity in supply. As a professional mining engineer with over 20 years of experience, including 10 years in the bauxite and alumina sector with major international producers, I have witnessed these challenges firsthand.

The price of alumina is around $425 USD/t, while aluminum is trading at approximately $2,700 USD/t. The complexity of upstream bauxite mining and its grade can significantly impact refinery profit margins. Not all bauxite ores are compatible with refineries worldwide, as the Bayer process is a delicate and challenging endeavour in chemical engineering. The process requires substantial chemical energy to convert raw bauxite into alumina and manage the balance of energy to minimise waste. Additionally, dealing with the toxic byproducts of refining presents significant environmental challenges.

Mining bauxite presents distinct geological, mining, and environmental engineering challenges. Geologists focus on finding homogeneity in the bauxite ore, while mining engineers concentrate on economic extraction and improving productivity by reducing variability in the ore to optimise refinery margins. Additionally, managing the environmental impact of exposed land and rehabilitation whilst maintaining grade balance is another aspect of this challenge.

Governments and regulators worldwide are increasingly imposing stricter requirements on miners to improve mine management, reduce the opening of virgin land, and mitigate environmental and ecological impacts. This Climate and regulatory pressure is challenging many mining operators, raising questions about their long-term sustainability and potentially affecting the entire supply chain. Miners must now navigate complex regulations, implement detailed mining studies, introduce sustainable practices, and invest in environmental rehabilitation to remain compliant with the license to operate. These additional responsibilities not only impact operational costs but also influence the stability and efficiency of the global supply chain.

Then comes the global trading challenge, that is matching mined bauxite ore with alumina refineries. The bauxite mined ore must be blended to fit refinery specifications or the Bayer process, which varies significantly for high, mid, or low-temperature bauxite refineries. Key factors include caustic consumption, energy used for processing, tailings or residue capacity, and available real estate for potential expansion in tailing storage. Refineries are immovable infrastructures with high capital cost for construction and the operating cost is a variable item based on the bauxite feed.

Few countries are expanding refinery capacity or approving new real estate for these projects. Despite West African countries emerging as significant bauxite producers, investors have yet to install sufficient refining capacity there, nor is there strong appetite in the investment which is a different topic of conversation.

The key issue is that refineries are struggling to maintain margins with their dedicated bauxite deposits worldwide, posing a potential threat to the aluminum supply chain's viability to meet the 2050 population demand for this resource.

Of course, today there is a focus on the renewability and recycling of aluminum products. However, we must consider where the recycling industry currently stands versus its technological capabilities, the cost, and the capacity of recycling plants to meet the growing demand for aluminum.

Are we living in a world of conflicting priorities, balancing climate change, net-zero goals, aluminum recycling, and the capacity to meet human consumption demands? Investors are rushing to invest in green initiatives, which are commendable and necessary for the planet. However, we risk losing focus on the sustainability of the critical supply chain for aluminum. While our intentions to help the planet are noble, we must consider the practical implications and ensure that by 2050, we have a balanced approach that supports both environmental goals and the stability of essential supply chains.

Some food for thought :)

As a professional who has worked in the upstream aluminum supply chain, I want to highlight the importance of understanding mining supply chain dynamics. The sustainability of the aluminum industry hinges on a delicate balance of global trade economics, which can significantly impact the availability and viability of aluminum products for future populations. It is crucial to curate and expand our knowledge in this area to ensure the continued stability and sustainability of the aluminum supply chain.