Evangelos Mytilineos, president of the eponymous group and also of Eurometaux, characterizes the cost of the energy transition as an "existential challenge" for the aluminum sector , while he believes that the imposition of the carbon tax ( CBAM ), which was recently activated at the borders of the EU, should be reconsidered, as it does not fulfill its objective, that is to equalize the competitiveness of European products in relation to those from third countries with lower carbon costs.
In an interview with Platts, Mr. Mytilineos states that the European aluminum sector needs a realistic approach to the energy transition, adding that European aluminum producers face "existential" challenges and that CBAM is an ineffective defense. However, he believes that despite the immediate problems, there is hope in the long term.
In detail, the interview of Mr. Mytilinaios as published in Platts is as follows:
"The pressure of the energy transition burdens the "existential" challenge facing the aluminum sector in Europe and the CBAM is not suitable to protect the continent's aluminum producers from international competition.
European aluminum producers are struggling to adapt as they face sluggish markets, slow economic growth, particularly in Europe's biggest market Germany, high energy prices and growing pressure to cut carbon emissions.
Mytileneos was one of the first companies to realize that synergies between the energy and metals sectors could make it more resilient to the costly decarbonisation effort. The company has one of the lowest production costs in the industry due to synergies with the energy sector and its position as the largest vertically integrated aluminum producer in the EU.
Therefore, Mytilineos' aluminum company, Aluminum of Greece, although not immune to weak demand and volatile prices, was able to operate its alumina plant and aluminum smelter at full capacity in 2023. The company produced a total of 239,000 mt aluminum in 2023, up 1% from 2022, including 183,000 mt virgin aluminum and 56,000 mt recycled. Alumina production also increased by 1% year-on-year to 869,000 mt in 2023.
CBAM review needed
Referring to the difficult situation for EU producers, Evangelos Mytilineos noted that “aluminum demand is very low in Europe because the European economy it's not going well' and added that energy prices will remain a key challenge for the industry as electricity accounts for around 40% of the total cost of producing primary aluminium.
Mr Mytileneos also warned that CBAM will not achieve what it is designed to do, which is to level the playing field for Europe's industries, since they are reducing carbon emissions faster than other parts of the world.
“From the beginning, we have argued that CBAM is not an appropriate or effective tool to address 'carbon leakage'. It is a border liability that does not compensate for the devastating blow resulting from the ETS (EU Emissions Trading System) to the production costs of EU industries, which means that European producers will be squeezed in terms of their competitiveness," said Mr Mytileneos.
He even suggested that the EU should review the CBAM approach and look across the Atlantic to the US's Deflation Act and form a climate alliance with other countries to drive decarbonisation.
"Industries operating in countries within this climate alliance will all face the same carbon costs," Mytileneos said.
And while the aluminum industry struggles with expected increases in carbon costs on top of energy prices and tepid demand, the market for green, lower-carbon aluminum has yet to pick up. According to Mr. Mytilineos, the market must first see its "existential" problems.
However, "Mytileneos" as a company expects that in the long term the market will develop due to electric vehicles and RES and seeks to operate its smelter mainly with RES, aiming for emissions of 3.4/mt of CO2 per mt of aluminum produced by 2030, in relative to 11.3 mt CO2 in 2023.
Separation of activities
Mr. Mytileneos conceived the idea to separate the construction business and focus the company on energy and metals during the pandemic. "It took two or three years for our European competitors to realize that the energy landscape changed during the high-price crisis," Mytilinaios said, adding that large consumers such as aluminum smelters needed "special advice" on how to better deal with their energy supply. Not every energy company can do that."
It should be noted that Aluminum of Greece exited a 60-year power supply agreement from the state electricity company PPC at the end of 2023. The company had a fixed price contract with PPC and when prices spiked in 2022 they were offset against wholesale prices, which they reached 400 euros/MWh.
Now PPC's contract has expired and the company is focusing on reducing carbon emissions to reach net zero by 2030.
In January of this year, 8% of the energy mix of Mytilineos' metals operations was from RES and as the company has stated to S&P Global, this will likely reach 20% by 2030, while Aluminum of Greece will cover all electricity needs from RES stations.
At the moment, the typical wholesale MWh is around 70-80 euros, "but even that for metal companies is a lot," said Mr. Mytileneos. "Our metals division represents 6% of the total grid consumption in Greece and is by far the largest consumer of energy."
Despite his company's move toward renewables, Mr. Mytilineos joins a growing number of industry "stakeholders" who are advocating a more realistic approach to decarbonization.
“Europe has focused exclusively on aggressively pushing for decarbonisation of energy, taking reliability and affordability for granted. We made a painful mistake," said Mytileneos.
The pandemic, the Ukraine war and the conflicts in the Middle East have proven that supply dependencies must be diversified and that fossil fuels will be needed to bridge the shift to green energy.
“This is the only way to avoid massive compromise of the transition itself. If we ask companies to invest only in projects with challenging financials, sooner or later the course will fail."
Source: www.wolrdenergynews.gr
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