Europe's metal industry asks EU to help it deliver energy transition

Eurometaux has asked EU policy-makers to allow member states to support domestic producers with state aid to ensure supplies of the metals crucial for the transition to low carbon energy

Industry association Eurometaux has asked EU policy-makers to allow member states to support domestic producers of aluminium, zinc and silicon with state aid to ensure supplies of the metals crucial for the transition to low carbon energy.

The European Union has a goal to reduce net greenhouse gas emissions by 55% from 1990 levels by 2030, as a step towards "net zero" by 2050, with plans including electric vehicles that need aluminium and renewable energy that needs zinc and silicon.

More than half of the EU's aluminium and zinc smelters have reduced capacity or have closed temporarily, while silicon production has been cut because of record power prices and squeezed supplies.

Even before the crisis hit in the final months of last year, electricity's share of production costs for aluminium, silicon and zinc was between 30%-40%.

"The EU has temporarily lost 650,000 tonnes of primary aluminium capacity; about 30% of the total," Eurometaux said in a letter to European Commission President Ursula von der Leyen.

"Europe's supply gap must be bridged with imports, often with a higher (CO2) footprint."

Imports also increase reliance on leading industrial metals producer China.

One measure detailed in the letter is for the EU to "swiftly develop an emergency state aid framework that provides clear conditions and rules allowing member states to take quick action to help national industries" facing unprecedented energy costs.

Another is the use of "national strategic gas reserves to stabilise the market".

"There is a real risk of further curtailments and closures in our sector, to the detriment of Europe's strategic autonomy goals," said the letter, adding other energy intensive sectors will be put off from investing in decarboniation.

In the medium term, Eurometaux suggests the EU encourages schemes supporting corporate power purchase agreements (PPAs) for carbon free electricity.

"It's hard to make investments in many European member states because you can't get long-term contracts. The state can play a role in renewable PPAs," said Cillian O'Donoghue, Director, Energy & Climate Change at Eurometaux.

"Metal producers can help by signing contracts for renewables, but they need the state to guarantee that the energy required for their production plans will be available and competitively priced."

(Reporting by Pratima Desai; editing by Barbara Lewis)