China threatens Europe's aluminium recyclers

LONDON: Chinese competition and its huge demand for scrap metal threaten Europe's aluminium industry, speakers told a recycling conference in Germany.

"China is a big threat no doubt about it," Patrick de Schrynmakers, secretary general of the European Aluminium Association, said at the congress organised by the Organisation of European Aluminium Refiners and Smelters (OEA).

The only way to keep China at bay is to cut costs and enhance productivity in Europe, Schrynmakers said late on Monday.

China's rapidly growing market consumes vast amounts of both primary aluminium and scrap, a secondary raw material produced from re-melting recycled aluminium.

The strong demand from China has sucked global scrap away from local producers who fret, not only about China as a giant aluminium supplier and competitor, but as a raw material rival.

"There will be a fight over raw materials," Roland Scharf Bergmann, President of the European organisation OEA, said.

"The producers that can keep costs low and find enough scrap at the right prices will be the winners," he added.

In Europe some 45-60 percent of total refined aluminium produced use scrap as feedstock and in the region EU27 recycling production has surpassed primary production.

Bergmann said scrap was still availabile in Europe as so far most of the scrap exported to China has come from North America due to a weaker dollar in comparison to the more costly euro.

But the secretary general of the OEA, Gunter Kirchner said "So far the European Union has been protected but what will happen if the euro falls against the dollar?"

Strong demand for scrap has fuelled prices and Bergmann said the premiums stood at historically high levels.

"We are looking at premiums of around 300 euros above high grade, which is a very high premium and will hopefully support especially the re-melting industry," Bergmann said.

Europe turned into a net exporter of scrap in the first half of 2001 and since 1995 the global flow of scrap transported across the world has changed completely, Kirchner said.

In 2005 China imported over 1.2 million tonnes of aluminium scrap, while the United States imported nearly half a million and Europe some 288,000 tonnes.

In the same year, the US exported 1.1 million tonnes and the European Union exported some 692,000 tonnes.

The President of the European Recycling Federation Eurometrec Bjorn Grufman said it was not surprising that European scrap was being shipped to Asia.

"Mixed material is being shipped to low labour-cost countries. We could never compete with their labour costs with so many people needed to go through the material," he said.

Grufman said the Chinese car industry is also attracting more aluminium producers to the area with firms moving.

"Some will move with their customers, but others will stay," Grufman said, adding that European producers would still be able to compete with the Chinese if the industry cut costs.

The high costs of energy put additional pressure on the refining industry with their margins being squeezed and small producers said it would not be easy to cut costs. "The Chinese are so many and work for almost nothing there are difficult times lying ahead," said the owner Marc Sala Cebrian of a small family-run firm Aluminsa in Spain.