Rising aluminum prices in 2010 may not be enough to halt the decline in European output of the metal as producers quit the region for cheaper electricity in the Middle East.
Half of Europe’s remaining capacity may shut by the end of this year and two-thirds could be cut through 2013, according to the European Aluminium Association. Relying on imported metal would raise costs for fabricators of aluminum products such as foil and window frames, who employ more than 200,000 people in Europe, the EAA said. End-users such as Volkswagen AG and Bayerische Motoren Werke AG would also end up paying more.
“Western European smelters are gradually withering on the vine,” said Julian Kettle, a London-based analyst at metals research company Brook Hunt who has tracked the aluminum market for more than two decades.......Electricity is the biggest single cost for producers. European plants pay tariffs equal to about $950 for each ton of metal produced, Daniel Brebner, an analyst at Deutsche Bank AG in London, wrote in a Dec. 11 note. Some producers are struggling to renegotiate “competitive” power contracts, Brebner said.
The European Commission’s emissions trading system imposes carbon-dioxide quotas on utilities and requires those exceeding their limits to buy or borrow credits. European electricity prices are the highest in the world because generators pass on the cost of their emissions, the EAA said....MORE