Introduction
Aluminum is one of the most widely used metals today, second in usage only to steel. Aluminum is used extensively in the packaging, automotive, aerospace, and construction industries and becoming more common in both the consumer electronics and medical devices industries as well. In 2017, global aluminum production exceeded 50 million tons.1
Despite the ubiquity aluminum enjoys presently, this was not always the case. Compared to steel and iron, aluminum is a relatively “young” material, at least in the context of engineering. It was not until the late 19th and early 20th centuries that aluminum production advanced to a level that made the use of aluminum feasible at a large scale and prompted rigorous engineering understanding.
Today, most aluminum is produced by large refineries, primarily in China, Africa, and North America, with China accounting for more than half the world production. Russia is also a major producer. Most aluminum is extracted from Earth’s crust in the form of Bauxite and then refined. Secondary production, or the production of aluminum from scrap such as cans, has exploded in recent years and now accounts for a significant portion of the world aluminum supply.
Market wise, most aluminum is controlled by a handful of primary refineries, which then supply smaller refineries which create specific alloys, which then tend to feed various wholesalers or sell directly to major companies. As an individual, you cannot easily trade in the physical metal, like you can with gold or silver, but you can buy stock in refineries, futures, or ETFs. Some large firms trade directly in aluminum contracts, which are typically in metric tonnes.
The aluminum price is impacted by a variety of factors at all levels of the supply chain. This paper will provide a brief overview of the major contributors to the cost of aluminum and dive deep on electricity and alloying and tempering processes and how they affect the price of aluminum. Not only are these two of the largest contributors to the price that end users pay for aluminum, they are also two of the more interesting factors from a metallurgy and materials selection standpoint.
Overview of Major Factors Affecting Aluminum Costs
The price of raw aluminum varies with a few main factors: the cost of bauxite, the strength of the US dollar, the cost of electricity, and demand from the relevant industries.2 Shocks to the aluminum price can occur at many points along the aluminum supply chain, but the above tend to be the major factors.
Figure 4: Schematic of the aluminum supply chain.3
Bauxite, as the primary input into the aluminum production process, has a huge impact on the price of aluminum. Fortunately, the price of bauxite is relatively stable as the world supply is extremely large (enough for many centuries at present usage rates) and the supply is spread across many regions, making it more resistant to externalities such as wars and natural disasters.4
The strength of the US dollar also influences the price of aluminum. The US serves as the world’s reserve currency and as a result most commodities are priced in dollars on the market.5 Due to the lag between the value of the dollar and price adjustments to commodities, aluminum, and most other commodities are hurt by fluctuations in the value of the dollar. Some large trading firms take advantage of this arbitrage opportunity and will trade heavily in metals when the dollar is fluctuating more than usual, creating artificial demand for aluminum and raising the price.
Demand from major aluminum consuming industries also drives the aluminum price. As a primarily industrial commodity, aluminum tends to have a very elastic pricing and adheres intuitively to the law of supply and demand. Chinese demand, which does not always follow the demand of the various aluminum consuming industries, also heavily influences aluminum prices as China consumes about 40% of the world’s aluminum.6
Electricity cost is the arguably largest factor in the aluminum price.6 The electrolysis process used to split aluminum oxide into pure aluminum and various oxides is extremely energy intensive. Energy costs typically account for between twenty and forty percent of the final cost of aluminum.6 In European producers, electricity makes up for around 36% of the finished cost of bulk alumimum.7 Due to this, fluctuations in the price of electricity, oil, natural gas, and other energy sources are typically reflected in the price of raw aluminum.
In addition to the factors mentioned above, which primarily affect the price of raw or bulk aluminum, a large mark up to the aluminum price occurs when the aluminum is processed into specialty alloys and tempers. These alloying and tempering processes are extremely important, as almost no products use pure, untampered aluminum.
Of the many factors that affect aluminum pricing, the rest of this paper will focus energy usage and the alloying and tempering processes, and where those costs come into the aluminum production cycle.
Energy Usage in Aluminum Production
Most of the energy consumed in the aluminum production process is used in the electrolysis process used to separate the aluminum from the alumina, Al2O3,
that is provided as an input to the smelting process. This process is called the Hall-Héroult process.9
In the Hall-Héroult process, alumina is poured into molten baths of crylolite. An anode and a cathode are also lowered into the bath, and a huge electrical current, between 200-500kA (but at a relatively low 5v) is passed between the anode and cathode. This energy input causes the oxygen in the alumina to separate from the aluminum and oxidize on the carbon anodes and cathodes.8,9 The molten aluminum is then periodically siphoned off and typically poured into ingots.
Figure 2: Industrial Hall-Héroult cell schematic.9
At an input of 250kA and 5V, a typical Hall-Héroult cell is consuming 1250kW of power and translates to around 12-15kWh per kilogram of aluminum.8 At North American industrial electrical prices of about 8 cents per kilowatt-hour, a single Hall-Héroult cell would cost about $100 an hour to run just in electricity.10 Plants vary dramatically in size, but many are in the range of 100-500 cells, which would mean a plant is spending between $10,000 – $50,000 an hour just in electricity for the cells. As a result of this, smelters are extremely interested in cutting down the energy costs associated with this process and are located near sources of cheap electricity. The theoretical minimum electrical consumption for the Hall-Héroult process can be calculated from the enthalpy of reaction of the various chemicals used and the energy need to provide the necessary heating, which comes out to around 9kWh/kg of aluminum.11 This is interesting, because the more efficient cells are already close to the theoretical limit, meaning the only way to lower the energy costs of aluminum is to invent a new process or lower the cost of the energy used to produce it.
Another interesting cost associated with the Hall-Héroult is the cost of producing carbon dioxide. Many countries, especially in Europe, have implemented stringent restrictions on industrial CO2 emissions and charge a carbon tax, or a fee on for releasing any carbon dioxide into the atmosphere. When the oxygen from the electrolyzed alumina binds to the carbon anode or cathode, it creates carbon dioxide. This carbon dioxide production is significant, about 1.8 tons of carbon dioxide per ton of aluminum produced.12 In the EU, the carbon tax is around $20 per ton of CO2 released.13
Alloying and Tempering
Pure aluminum, as it leaves the electrolysis process, is rarely used. Almost all commercially used aluminum is some alloy. Alloys are divided in to series, of which aluminum has 8; 1000, 2000, 3000, etc. with each series specifying which metals the aluminum in that series is alloyed with. Some alloys within a series contain additional metals, as compared to the series specification. The 1000 series is essentially pure aluminum and are typically at least 99% pure, though some 1000 series alloys intentionally contain trace amounts of other metals such as manganese. There are dozens of alloys within each series, where the specific alloy will have the first number of the series and the rest specify the specific sub alloy, 6061, for example.14
In addition to a series number, aluminums also have a temper number, usually designated with a “-Txx” where the first number specifies a heat treatment, work hardening, and/or aging process. The second number typically designates a thermal stress relief or straightening process, but is really only used for –T5x tempers.14 There is also an “o” temper, which designates a fully annealed, very soft aluminum.14 One of the most widely used aluminum alloys is 6061-T6, which is a general-purpose alloy with a good mix of mechanical properties that is also relatively easy to weld and machine.
Mechanical, electrical, thermal, and almost all other properties vary tremendously from alloy to alloy. For instance, ultimate tensile strength varies from about 90 MPa for pure aluminum to over 700 MPa for 7068 aluminums. All of the properties of a specific alloy must be carefully taken into account when designing.
Most alloying happens at the smelter, but there are plants that specialize in alloying and tempering alone, and buy raw aluminum ingots specifically for melting into specialty alloys. Many specialty alloys are proprietary, and demand a much higher price than common alloys, making specialty alloy production a business and often a large price adder.
The price of bulk, pure or common alloy aluminum is 90 cents per pound (assuming you can buy at least a metric ton). Despite the fact that aluminum is rarely used in the pure form, as a commodity aluminum is only really traded in bulk in the pure form or sometimes in common alloys. However, many specialty alloys, which are more expensive to begin with, can only be bought in much smaller quantities making them even more expensive. At the consumer level, 7075, which is a relatively common, higher strength aluminum alloy costs over ten dollars a pound, whereas 3003 aluminum, a softer, forming alloy, is closer to three dollars a pound (for the same size plate).15 Interestingly, the scrap price of some aluminum alloys is higher than the bulk price of raw aluminum.
The result of this is that way manufacturers pay for the aluminum that can actually be used for a finished product is often an order of magnitude higher than the bulk aluminum price. All of this makes availability and cost an especially important part of the materials selection process, even for a material as common as aluminum, due to the huge variance in physical properties and cost from alloy to alloy. The designer needs to think carefully about what particular property of the aluminum they specify that they care about. No sense paying for high thermal conductivity if tensile strength is what is important in a specific application.
Conclusion
In conclusion, energy inputs and alloying / tempering processes are two major drivers of the price of aluminum in finished goods. While the energy costs associated with aluminum are unlikely to drop dramatically without a new aluminum refinement process being developed or a decrease in the cost of energy, due to the Hall-Héroult being relatively close to the theoretical limit, engineers as can lower the real cost of the aluminum in the products they design with careful selection of the most suitable aluminum alloy for their application.
Works Cited
1. Mlynarski, K.W., 1998, Survey methods for nonfuel minerals: U.S. Geological Survey Minerals Yearbook 1998, v. 1, p. 1.1-1.4
2. https://commodity.com/precious-metals/aluminium/
3. MACHLINE, Claude; GARCIA, Fernando; AMARAL JR., José Bento and NOBRE, Wilson.Analysis of the aluminum production chain in Brazil. RAE electron. [online]. 2002, vol.1, n.1 [cited 2018-10-19], pp.1-12. http://dx.doi.org/10.1590/S1676-56482002000100012.
4. https://www.aluminum.org/industries/production/bauxite
5. https://en.wikipedia.org/wiki/Bauxite Wikipedia contributors. “Bauxite.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 21 Oct. 2018. Web. 3 Nov. 2018.
6. https://www.aluminum.org/industries/production/primary-production
7. Kvande, H., & Drabløs, P. A. (2014). The aluminum smelting process and innovative alternative technologies. Journal of Occupational and Environmental Medicine, 56. doi:10.1097/JOM.0000000000000062
8. https://scholarworks.waldenu.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=5571&context=dissertations Nloga, Joseph. “ Aluminum Production Costs: A Comparative Case Study of Production Strategy.” Walden University, Walden University, 2017, pp. 30–50
9. https://en.wikipedia.org/wiki/Hall–Héroult_process Wikipedia contributors. “Hall–Héroult process.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 29 Aug. 2018. Web. 3 Nov. 2018.
10. https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
11. U.S. Energy Information Administration. (2012). Energy needed to produce aluminum. Retrieved from https://www.eia.gov/todayinenergy/detail.cfm?id=7570
12. https://aluminium.org.au/climate-change/aluminium-smelting-greenhouse-performance/
13. https://en.wikipedia.org/wiki/Carbon_tax Wikipedia contributors. “Carbon tax.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 31 Oct. 2018. Web. 3 Nov. 2018.
14. https://en.wikipedia.org/wiki/Aluminium_alloyWikipedia contributors. “Aluminium alloy.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 26 Oct. 2018. Web. 3 Nov. 2018.
15. https://www.onlinemetals.com/merchant.cfm?step=2&id=916
Author Autobiography
Hi – I’m Jimmy. I am a senior in course 2, just back from a gap year. I grew up in Mooresville, a small town outside of Charlotte, North Carolina. I spent most of my childhood building forts and treehouses with my younger brother and neighbors in the woods behind my house. As I grew up, the urge to build switched from forts to tinkering, go karts, and eventually cars. I was also pretty good at math so engineering seemed like the natural progression. I wasn’t always the most studious pupil, so getting into MIT came as a surprise. I moved to MIT having barely left my hometown before and it was a bit of a shock.
During my first few semesters at MIT, I struggled quite a bit, as I didn’t have quite as strong of a background in math and science as many of my peers. A silver lining of this was that I was better at not knowing things than some of the other students and pretty accustomed to the sensation when I got into the more advanced classes in the major, which helped me not to panic and stick to the basics.
Since starting MIT, I’ve interned in a few different industries. At first, I stuck more to what I knew in the conventional automotive industry, but later on I worked at an autonomous vehicle startup. More recently, I spent a year working in product design at Apple, which was a radical change from the sort of work I was used to doing. Presently, I am hoping to finish up my course work this year and graduate in the spring and return to working at Apple.