Aluminium in Italy in 2020, Issues and Outlook
All sectors of the Italian aluminium industry are ending 2020 with heavy decreases in production and turnover. But light metal will be among the leading players in the Next Generation EU programme. The focus of Mauro Cibaldi, President of Centroal
2020 will be long remembered by everyone as the year of the “Covid-19 pandemic”. A microscopic virus triggered one of the biggest health crises, perhaps only comparable to the “plague” of the 16th century, which in a very short time had social and economic impacts which would have been unthinkable a year ago. Italy, after China, was the first country in the Western world to tackle the outbreak of the first wave of the virus, without having a specific cure or a well-defined plan of action, thus leading the Government to drastic choices including the total closure of many businesses, services and schools. This was certainly the most problematic aspect of the health pandemic, which affected many sectors severely, and it is estimated that it will reduce the national annual GDP by about 10%, not even sparing our sector: aluminium producers and processors, represented in Centroal.
Starting from the directives of the Prime Minister’s Decree dated March 22nd, which did not consider the metallurgy sector to be fundamental (ATECO code 24 was excluded from the list of activities allowed to continue operating), all activities in the sector had to be suspended from March 23rd until May 4th, with a few rare exceptions, including companies involved in the production of aluminium food or pharmaceutical packaging, which were recognised as serving indispensable activities.
As a result, extrusion, refining and castings production companies were strongly affected both as regards production and the revenues and profitability of their operations, leading the most fragile companies to bankruptcy proceedings (fortunately in a very limited number). Laminates destined for the production of food and pharmaceutical packaging, on the other hand, managed to keep their production lines active; however, all non-essential production such as those for the automotive, mechanical and aerospace industries had to be stopped. All this led to a significant drop in every sector, as noted by our association. Analysing the data of the individual sectors in greater detail, extrusion showed an immediate decrease of 25%, if we consider the first half of 2020 compared to the previous year. Fortunately, the reopening in May, and the demand from abroad (countries initially less affected than Italy) made it possible to partially mitigate the negativity as early as September 30th (also taking advantage of a few more working days in August), and showing in perspective a further partial recovery, so that the end of 2020 will probably be reached with an average drop in the sector of about 10% (Figure 1). The trend in extruded products is also directly linked to the producers of aluminium billets, the raw material needed for their production, whose results were comparable. The refining of secondary or semi-primary alloy ingots, combined with the castings market, showed an even more pronounced negative aspect. The sector was already going through a rather difficult period in the automotive domain, struggling with the transaction from thermal to hybrid engines before moving on to fully electric engines. The pandemic completely blocked the sale of cars (“not necessary” goods when people cannot move because they are in “lockdown”, with drops in car sales to private individuals of up to 97% – April ‘20 on March ‘20 -).
The sector therefore found itself in the middle of the year with a drop of almost 40%, compared to the same period of the previous year. Also for these operators, however, on one hand, the very strong economic recovery in China – the first country to emerge from the Covid-19 health emergency – which required a large quantity of aluminium alloy ingots, also importing them from Italy, and on the other hand, the drive coming from a series of European incentives on new low-emission vehicle projects, made it possible to partially recover the drop in the first half of the year, and it is expected to be slightly less than 20% in 2020 (Figure 2). The same trend was also seen in the production of castings, which should close the year with a negative figure of around 18% compared to the previous year.
The aluminium laminate sector, on the other hand, performed better than others. Analysed as a whole, it also showed a decrease in production, but we need to make a distinction: we find a positive value for those who are more oriented towards the production of food and pharmaceutical packaging (+5% as an average value compared to 2019), both because of the absence of competition from Chinese producers in the first part of the year (blocked due to the pandemic) and because these sectors have always been able to operate even in the most difficult months of March and April.
Unfortunately, producers of laminates and their semi-finished products, slabs/plates, dedicated to the automotive sector, suffered heavily from the decline in this sector, as already indicated for refiners, reaching drops of almost 40% in the immediate aftermath of the first wave of Covid, partially recovering from June onwards. The global annual figure for laminates, without any further new “lockdown” between now and the end of the year, will show, as mentioned above, a drop of 7% compared to 2019, the first after 9 years of continuous growth (Figure 3).
The drops in individual sectors could not fail to have repercussions at a national level on aluminium consumption, which will stand at one million eight hundred and twenty thousand tonnes, with a reduction of about 12%, bringing per capita consumption estimated for this year to about 30 kg/person (Figure 4). In our sector, these decreases represent the deepest crisis in this century, even worse than that of 2008, triggered at the time by a financial crisis which clearly erupted after the bankruptcy of the American investment bank Lehman Brothers.
2020 cannot and must not, however, be seen only as a negative year
It is necessary to recognise the positive aspects of every crisis, get reorganised and start again with greater momentum towards the future. This is what we can see in different sectors. Starting with the health sector, for example, there are many examples of the courage and initiative of people or companies that used their ingenuity to fight Covid-19. Personally, I would like to mention the altruism of a small Italian startup – ISINNOVA – which was able to create medical devices to allow patients to inhale oxygen and continue to breathe through a laser printer and a diving mask available on large scale retail outlests, saving many lives. Another example of resilience comes from the school environment, where schools have demonstrated an ability to adapt to total closure, introducing distance learning, which among countless problems and defects, helped pupils to continue on their educational path. Certainly lessons in attendance are incomparable, but the school tried not to stop in this way.
This has also been the case in our sector, where the entrepreneurial skills typical of us Italians have been able to keep the supply chain compact, and at least partly make up for the lack of production by working, when possible, on Saturdays and for most of the month of August, also encouraging correct behaviour among its stakeholders, both from a health and social-ethical standpoint, such as, for example, the “#iopagoifornitori” (“I pay my suppliers”) campaign. I believe that the most stimulating and promising aspect for our sector will come from the decisions of the European Commission. After periods spent drifting towards individual nationalism, faced with the effects of the epidemic on the European economic and production system, the Commission has approved the “Next Generation EU” programme, whose nature and dimensions are extraordinary.
The mechanism, so-called “for recovery and resilience”, provides 672.5 billion euros (312.5 billion in grants and 360 in loans) to support the economic, social and productive system of the various member states of the European Union, setting clear priorities for its use.
Among these, in the fundamental guidelines for European development over the next decade, ecological transaction, energy efficiency and technological development have been indicated (in the so-called Green Deal plan), three elements which can be well associated with aluminium and its use.
The environmental and energy performance associated with production and processing, combined with the infinite applications of our material, which affect every aspect of the daily life of the citizen, and the broad market prospects, expected to increase, make aluminium the “material of the future”.
Aluminium is actually the ideal material to guide the environmental and energy transition of Italy and the European Union because it would allow the achievement of the guidelines through:
– The reduction of climate-altering gas emissions,
– the energy efficiency of production chains,
– the production of eco-compatible materials,
– the realisation of the circular economy.
The Italian aluminium supply chain must be a reference point for the elaboration of the country’s industrial policies because:
A. Aluminium contributes to saving energy and cutting CO2 emissions in many key sectors:
by providing lightness to all types of means of transport, from aviation to naval, trains and vehicles of all types;
making packaging more efficient in terms of use and recyclability;
enabling the construction of energy-efficient buildings.
B. The production of aluminium in Italy is based 100% on the infinite recycling of scrap, which in industrial use:
reduces the disposal of obsolete products;
reduces by 95% the global CO2 emissions associated with the production of primary aluminium (currently not present in Italy).
The circular economy, thanks to the valorisation of aluminium scrap, which is a precious “second raw material”, allows the reduction of the exploitation of the earth’s resources; Centroal, with the assistance of Strategic Advice, as part of the AFFG- Aluminium For Future Generation project -, has adopted the messages indicated by the European Commission to carry forward the key messages of our material in the Italian and European Institutional Offices, suggesting a series of proposals to help our sector, the main ones being:
a) the introduction of mechanisms to encourage investments in waste recovery and recycling activities, as well as mechanisms to promote products made from recycled and recyclable materials such as aluminium. This can be achieved through a reduction in VAT rates for products made from recovered material. It is also necessary to avoid bureaucratic burdens and unnecessary constraints resulting from a restrictive interpretation of the rules in authorisation procedures for waste recovery activities ( such as, in Integrated Environmental Autohrisations – A.I.A. – and End of Waste authorisations).
b) The promotion of decarbonisation measures in the automotive sector such as:
the stabilisation of the “Fund for the purchase of low Co2 g/km emission vehicles”, which is currently experimental and will be discontinued at the end of 2021;
the introduction of a temporary premium for passenger cars and commercial vehicles in stock with different fuel supplies;
rewarding the use of recycled and recyclable materials such as aluminium in the automotive industry, to encourage investment in increasingly lightweight and eco-friendly components.
c) compensation for indirect ETS (Emission Trading Scheme) costs for the aluminium sector for the whole 2021-2030 period , in line with the provisions of the European Commission, which allows Member States to do so. The compensation of costs must be ensured by allocating an appropriate percentage of ETS auction revenues. In concrete terms, it is necessary to go beyond the allocation, which is still too limited (less than 10% of the auction revenues on emission rights), provided for by Art. 13 of Decree Law 101/2019 (the so-called “Company-saving Decree”) in order to overcome the Italian competitiveness gap with the industry of the other EU Member States.
d) the improvement of the energy and environmental performance of the building stock by integrating the current legislation on “Superbonus 110%”. (art. 119 of Legislative Decree 34/2020, so-called Relaunch Decree) with the provision of a certification system quantifying and enhancing the percentage of recycled materials used in the building industry. The Recovery Plan represents a great opportunity to reward, in the new incentive system for the 2022-24 three-year period , construction products having a minimum recycling content of 60% of the total, also envisaging a category which rewards the highest percentages of recycling content.
On a different note, again from Europe, 2020 will also be remembered by our sector (after years of data collection and rejected requests) as “the year of duties”: in fact, the anti-dumping duty on extrusions from China has become operative, and investigations have begun on laminates and thin sheet imported from the same country. These are important steps in defence of the national and European industry. The Commission’s decision does justice and underlines the commitment to protect the European aluminium industry from the harmful effects of unfair trade. We could no longer afford, among the major global markets, to remain without protective measures against dumping of Chinese aluminium semis. The effects of these actions will be seen from 2021 onwards, but it all started this year. So not only pandemics and negativity in this leap year, but also prospects for growth and success in the future!