The global power crunch could increase the cost of everything from cars to the humble soft-drink can as rising energy prices push up the cost of aluminium.The supply of aluminium - which is used to build cars, aircraft and even stepladders - is struggling to keep pace with demand because producers cannot get access to the vast quantities of electricity needed to create the lightweight metal.As a result, aluminium prices, already at historic highs, are expected to rise by about 33 per cent in the next couple of years.A large aluminium smelter consumes as much electricity as a city, and a single furnace, which is about the size of a lorry, uses enough power for 1,000 homes but produces only about three tonnes of metal a day. Anglesey Aluminium in Wales is Britain's biggest single consumer of electricity. Analysts forecast that the aluminium price will hit $4,000 a tonne in the next couple of years. The metal was trading at $2,900 a tonne on the London Metal Exchange last week, up 50 per cent in two years. Power costs have risen by about 50 per cent for the industry in the past five years and are expected to rise further as oil and gas prices continue to rise.
Aluminium production in China has risen from 4.3 million tonnes in 1999 to about 12.6 million tonnes last year. Higher energy costs could lead to smelter closures in China, which has some of the least efficient and most expensive producers in the world. Its smelters use electricity from coal-fired power stations and the price of their energy has risen dramatically. Chinese smelters also compete for power with the country's rapidly expanding cities. In February the Government diverted electricity to the cities to avoid blackouts and an estimated 600,000 tonnes of production was lost.
Similar power crunches have hit production in South Africa, Brazil and New Zealand, and aluminium producers are increasingly looking to areas with large energy supplies. Rio Tinto said last week that it was looking at smelter projects in Algeria and Libya, where large natural gas reserves could be diverted to industrial uses. “Access to secure and cheap power is now more important than ever for aluminium producers,” said Tom Albanese, the chief executive of Rio Tinto.
The environmental cost
— The cost of aluminium is expected to increase by 33 per cent to $4,000 a tonne but could go higher if the industry is forced to include the price of the carbon dioxide it produces
— Aluminium smelting produces about two tonnes of carbon dioxide for every tonne of metal. The huge quantities of electricity used add another 14 tonnes of CO2 to each tonne produced
— A single smelter using electricity from a coal-fired power station and producing 500,000 tonnes of metal a year will generate 8 million tonnes of CO2, equivalent to the entire CO2 output of Honduras
