Alcan pushes green credentials after solid 3Q results

Related tags Alcan Greenhouse gas

Alcan's membership of the Global Greenhouse Gas Register, a move
that follows solid third quarter results despite historically high
raw material costs, underlines the current trend towards greener
corporate governance. Anthony Fletcher reports.

Aluminium giant Alcan has joined the World Economic Forum's (WEF) Global Greenhouse Gas Register, an initiative to stimulate the disclosure and management by companies of their worldwide climate emissions.

The decision to join follows a successful year for both Alcan's greenhouse gas (GHG) programme, which exceeded its reduction objectives for 2003, and underlines the current trend towards greener corporate governance.

"Joining the WEF's greenhouse gas register underlines the importance of global accountability in Alcan's commitment to the environment,"​ said Alcan​ chief executive Travis Engen. "The success of our GHG reduction programmes further solidify Alcan's pledge to be a leader in environmental and sustainability issues."

Developed in partnership with leading international business and environmental organisations, the register aims to spur voluntary corporate climate action around the world by creating a global standard for the disclosure of emissions inventories and reduction targets.

In 2003, Alcan's GHG programme, TARGET, reduced emissions by 300,000 tonnes, more than double the established objective; newly-acquired group Pechiney reduced its direct emissions by 650,000 tonnes of CO2 equivalents, exceeding its annual reduction target by 100,000 tonnes.

Over the same period, the companies met all their reduction objectives against voluntary and mandatory national targets. Since 1990, both Alcan and Pechiney have significantly reduced their specific perfluorocarbon (PFCs - a greenhouse gas) emissions by 70 per cent.

While the methodologies behind these results differ, Alcan says that it has accounted for both in this first integrated report. The Pechiney GHG reduction activities and reports are being integrated into Alcan's programme, TARGET. Alcan expects to achieve its annual reduction objective of approximately 190,000 tonnes of CO2 in 2004 and 2005.

Other firms are making attempts to achieve greener production. Rexam Glass for example recently invested €15 million in its glassworks at Dongen, the Netherlands, to achieve significantly reduced energy consumption. The company claims that the improved furnace will operate within 10 per cent of the best performing glass furnaces in the world.

Achieving impressive emissions reductions also translates into operational savings, something that major packaging corporations such as Alcan are increasingly aware of due to the current squeeze on raw material prices. The company however believes it has a responsible and successful business strategy in place.

Indeed, recently published third quarter results showed an increase in operating profit, despite historically high raw material prices. Alcan's packaging business group profit (BGP) for the third quarter was $162 million, up $73 million from the year-ago quarter.

The increase, says the company, reflected the acquisition of Pechiney, volume growth, the realisation of synergies from the Pechiney and FlexPac acquisitions and the positive impact of the stronger euro.

Alcan's packaging business is truly global, with more than 100 operations and accounting for more than $3.5 billion in annual revenues.

But these positive factors were again partially offset by a significant increase in raw material costs, most notably resin. Compared to the second quarter of 2004, BGP declined by $5 million as seasonally softer demand was accompanied by higherraw material and energy costs.

Rising world energy costs, particularly oil prices to which continental European gas rates are tied, have triggered sharp increases in energy prices across the globe. Energy charges account for 20-25 per cent of production costs of industries such as manufacturers of glass products, pulp and paper, and steel, rising to 40 per cent for aluminium smelters.

As a result, the average London Metal Exchange (LME) three-month price for the third quarter was US$1,716 per tonne, an increase of US$30 per tonne over the average for the second quarter. Some market-watchers believe that prices of iron ore could rise by more than 20 per cent, and that contract prices could double in 2005.

This would add an estimated $US35 per tonne to steel production costs.

In addition, ocean freight rates are unlikely to fall back dramatically before 2007 when a significant number of new vessels enter service, providing a growing supply of shipping capacity.

"Looking ahead, we expect aluminum fundamentals to remain strong,"​ said Egen. "Raw material and energy costs will likely pose challenges in the near-term, but we are confident that our operating discipline will continue to serve us well."

In the meantime, Alcan's membership of the Global Greenhouse Gas Register should help to both drive down operational costs and help the company meet emissions reduction targets. In Europe, such action needs to be taken if the EU is to succeed in cutting its greenhouse gas emissions to 8 per cent below 1990 levels by 2008-2012, as required by the Kyoto agreement.

Related topics Processing & packaging

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