Why the COVID-19 crisis highlights the importance of recognising strategic value chains

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

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The COVID-19 pandemic that is ravaging Europe is not only destroying the lives of those affected; it is also negatively impacting the businesses that are doing their utmost to maintain the goods and services we rely on.

Very few industries are left unscathed, and the aluminium industry is no exception; the impact on our industry and the supply chains that depend on us is enormous. To make matters worse, some of the regions where our industry has a significant presence have been those hit hardest by this terrible virus.

The aluminium industry has mobilised its production facilities and employees to produce, under very strict safety conditions, semi-finished products that are essential for European citizens during the COVID-19 crisis.

Examples include aluminium profiles for field hospitals, respiratory machines, and other medical instruments and equipment, as well as can sheet and foil sheet for the packaging of pharmaceutical and medical products, food, drinks, pet food and many other perishable goods.

However, the production and supply of these products are at risk. This crisis shows we cannot depend on the supply of critical raw materials from other regions. It highlights the urgent need to recognise strategic value chains for Europe, both in the context of the announced actions under the new EU Industrial Strategy and the upcoming COVID-19 Recovery Action Plan.

Several aluminium plants across Europe have already closed due to government restrictions, the postponement and cancellation of orders, or a growing number of employees on sick leave. Other plants are on the brink of closing because they are running out of the personal protective equipment (PPE) needed to keep employees safe.

There have also been significant delays on the supply side because transportation is becoming more and more difficult due to a lack of drivers or carriers, quarantine periods for incoming vessels, and the closing of borders.

The European production statistics paint a telling picture. The aluminium extrusion industry in Europe already lost about 13% of its production in March. This is a substantial loss; however, as most closures or reductions happened in the second half of the month, the damage is still limited.

For April, the extruders expect a steep decline in production of 35%, which would result in capacity utilisation between only 50 and 60%. A 22% reduction in production is expected for May.

The aluminium rolling industry, which is heavily impacted by the decrease in demand from the automotive industry, is in a similar situation. Production in March declined by 13%, while a reduction of 18% is forecasted for April and a 15% reduction for May.

Aluminium recycling facilities, which are often SMEs, have closed in several countries. So far, the primary production plants have been spared from closures, primarily because restarting facilities is a lengthy and costly process. If an aluminium smelter is forced to close, it takes months and between €200 and 400 million to restart it again.

In the short term, we call upon the Commission to recognise aluminium production and recycling as an essential activity for Europe so that our factories can continue their operations and benefit from priority measures such as access to PPE.

We also need continuous efforts and coordination at the European level for EU border controls and closures to preserve the free circulation of all goods.

In addition, waste collection and sorting for recycling are facing serious difficulties due to transport restrictions and the lack of workers. If this issue is not addressed soon, it might result in less recycling and thus more incineration and even landfilling.

As aluminium recycling is essential for Europe’s raw material sovereignty, reduced recycling could also increase our dependency on primary imports with a significantly higher carbon footprint. The EU should do what is needed to ensure this crisis does not have any implications on the long-term green transition of our economy.

In the aftermath of the crisis, we support the idea that the EU should identify industrial sectors of European interest and call for the inclusion of aluminium among the strategic value chains to strengthen in the new Industrial Strategy and the upcoming recovery plan.

We believe the Industrial Strategy should support the decarbonisation efforts of low-carbon strategic value chains and offer protection against carbon leakage and unfair international competition.

We have outlined our policy recommendations to achieve these goals in our Aluminium Agenda 2019-2020, our Vision 2050 and Circular Aluminium Action Plan.

Will our industry survive the current crisis? Yes. But to thrive in the long run and keep the entire aluminium value chain in Europe, the support of policymakers is critical.

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