Commission sur les enjeux énergétiques du Québec - Future of the aluminum industry threatened - The world has changed, L Rate no longer fits the bill

MONTREAL, Sept. 30, 2013 /CNW Telbec/ - "While energy prices have dropped in every aluminum-producing region of the world, the L Rate paid by Quebec smelters continues to rise compared with key markets like the United States, where contracts are being signed for half of L Rate," said Jean Simard, President and General Manager of the Aluminum Association of Canada (AAC), before the Commission sur les enjeux énergétiques du Québec (CEÉQ) on Monday. "Quebec's aluminum industry cannot grow at the required pace to guarantee its future unless L Rate is brought in line with global energy costs."

The source of the threat is competition from new, extremely aggressive players in the U.S., Middle East, China and Russia, which have vast fossil fuel reserves and much lower energy costs than Quebec. As a result, by 2022, over two-thirds of the growth in aluminum production worldwide will occur in China, Asia and the Middle East, and 95% of that growth will be fossil-fuel based. The environmental impact of the shift alone should prompt Quebec to maintain the "thousands of well-paying, green jobs held by men and women in our plants who proudly work to produce the greenest ingots in the world," said Simard. "If Quebec's production were to move to China, it would generate 31 million tonnes more CO₂ equivalent per year, or double the reduction objective set by Quebec for 2020."

Aluminum—pillar of the Quebec economy
Basing his remarks on a study of Quebec's aluminum industry conducted by consulting firm Deloitte, the AAC head maintained that abandoning growth of Quebec's aluminum smelters by failing to adjust the energy rate to make it competitive will mean a slow and irreversible erosion of the province's smelting plants, along with the entire value chain and the thousands of jobs that comprise it. It calls into question Quebec's economic development model. For the AAC, "Aluminum is a pillar of the Quebec economy." The aluminum industry contributed through its anchor contracts to the development of Quebec major hydro-electric dam projects and continues to be an economic driver, generating 10,000 direct and 20,000 indirect jobs and accounting for 10% of Quebec's exports. Aluminum smelters alone inject nearly $3 billion into our economy annually.

To maintain its presence in Quebec, the aluminum industry has undertaken major efforts in the areas of productivity, wages, energy efficiency and greenhouse gas emission reductions and is now ranked in the top quartile in the world in all of these categories.

"The only input over which the industry has no control is the cost of energy at the L Rate and that is the only area in which our smelters now struggle to compete, scoring in the lower quartiles worldwide. As a result, new projects are going elsewhere, a fact highlighted by the recent closure of two aluminum smelters in Quebec," said Mr. Simard.

Quebec must preserve an industry that is vital to its economy and its environmental commitment
"Quebec must keep up with the changes that have occurred in the global energy industry. We must do all we can to avoid putting the aluminum industry at risk, as it is a major contributor to the Quebec economy and to global GHG emission reduction," concluded Mr. Simard, as he presented five recommendations on behalf of his association.

The aluminum industry thus asks the government to review the energy pricing for major industrial clients, including aluminum smelters, to enable them to move into the top quartile in the world and thus improve the competitiveness of the industrial and manufacturing fabric of Quebec. Mr. Simard requested that the government maintain its assistance to aluminum transformation by supporting research centres, the new aluminum industrial cluster and training centres, and promote allocation of energy blocks to energy-intensive industries tied to wealth-creation agreements. Lastly, the government should use its significant surplus of renewable power, competitively priced in relation to the global markets, to promote establishment of high-value added enterprises in Quebec. The AAC recommends the government use Quebec's low-carbon footprint aluminum as a draw for manufacturing companies.

Deloitte's study and the AAC brief are available at http://thealuminiumdialog.com.

About the Aluminum Association of Canada
The Aluminum Association of Canada (AAC) is a non-profit organization whose mission is to represent the Canadian aluminum industry in its dealings with the public, government authorities, current and potential users of aluminum and other players on the economic scene.

Founded over 20 years ago, the AAC represents three Canadian companies that are among the world's largest aluminum producers: Alcoa Canada Global Primary Products, Aluminerie Alouette and Rio Tinto Alcan.

SOURCE: Aluminum Association of Canada

Leïla Copti
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