Are aluminum vehicles really good for the environment?


Nov. 20 2020, Updated 2:08 p.m. ET

Aluminum and the environment

Do aluminum vehicles really help decrease harmful carbon emissions? That’s the million dollar question many people are asking. After all, that’s the basic motive behind the vehicle emission standards. We’ll look at this from two critical perspectives—the steel industry and the aluminum industry. In this part of the series, we’ll analyze the steel industry’s point of view.

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Aluminum production is energy intensive

The chart above shows the various raw materials that are used to produce aluminum. As you can see, it takes around four pounds of bauxite and eight kilowatt hours (or kWh) of electricity to produce one pound of aluminum. The cost of electricity represents around one-third of the smelting cost.

According to estimates, more than 3% of the electricity that’s produced globally is used in aluminum extraction. Australia is one of the world’s largest aluminum producers. In Australia, the aluminum industry accounted for 12% of total electricity consumption.

This makes electricity a key raw material for aluminum companies like Alcoa (AA) and Century Aluminum (CENX). Both of these companies are part of the SPDR S&P Metals and Mining ETF (XME).

Aluminum life cycle

According to the steel industry, aluminum production is energy intensive. As a result, it isn’t an environmentally-friendly metal—like it’s made out to be. A metal’s total life cycle—from production to disposal—should be considered.

Steel companies—like ArcelorMittal (MT) and US Steel Corp. (X)—state that aluminum’s total life cycle emissions are higher than steel. This means that using aluminum in vehicle bodies isn’t as environmentally friendly as it seems.

This is the steel industry’s point of view. To give you a balanced picture, we’ll also discuss the aluminum industry’s point of view. We’ll analyze this in the next part of this series.


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