Quebec needs to move beyond simply smelting aluminum – by Bertrand Marotte (Globe and Mail – November 8, 2011)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

MONTREAL – For decades, Quebec’s foreign-owned aluminum sector has been a source of pride in a province that can use all the high-powered manufacturing might it can get.

Boosted by financial backing from the government and cheap hydroelectric rates, the sector has played a starring role in the province’s economic development.

But the three major players in North America’s most aluminum-intensive region – the third largest in the world after China and Russia – struggle to make Quebec a centre of aluminum-product innovation.

Despite years of effort by the industry to update, including Alcoa’s confirmation of plans on Monday for a $2.1-billion expansion and modernization program at three Quebec facilities, the province remains for the most part a simple exporter of primary aluminum to the four corners of the world.

For the industry to continue to thrive, moving up the value chain is imperative. Powerful emerging players like China and Russia are already shifting in a big way from primary manufacturing to higher-margin products, part of a growing worldwide shift to the use of aluminum in non-traditional areas.

The lightweight industrial metal has long been a staple material in such products as window frames, juice and soft drink cans and cooking utensils. But its usage is being stretched into other areas, including building construction and aerospace.

“Aluminum is becoming a tremendous source for all sorts of applications – the auto sector for example,” says Jesus Villegas, senior analyst with

Harbor Intelligence in Austin, Texas. “Cars are increasingly being made with aluminum parts.”

Companies such as Alcoa Inc. – the U.S.-based parent of Alcoa Canada – that are developing innovative uses for aluminum are benefitting to a much greater extent in foreign markets, notably Asia.

Alcoa Inc. is already working with a Chinese partner – Zhengzhou Yutang Bus Co., the country’s biggest bus manufacturer – to make environmentally friendly buses with aluminum chassis, turning out about 27,000 a year. The vehicles are 46 per cent lighter than a regular bus, so they use less fuel and emit fewer greenhouse gases.

“Why can’t we do that here?” asks Jean Simard, head of the Aluminum Association of Canada. “It’s not rocket science. It’s common sense.”

Canada produced 2.9-million tonnes of aluminum in 2010, about 7 per cent of global capacity. About 80 per cent of that is exported.

In Quebec, where 90 per cent of the Canadian industry is concentrated, aluminum production represented 10 per cent of the total value of manufactured exports last year. It employs an estimated 30,000 people directly and indirectly.

The three main players – Rio Tinto Alcan, Alcoa Canada and Aluminerie Alouette – are aware of the risks posed by more aggressive competitors. They plan to invest between $7-billion and $10-billion over the next 10 years to modernize and expand their Quebec facilities to produce more innovative, higher-margin products.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/quebec-needs-to-move-beyond-simply-smelting-aluminum/article2228534/

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