Market Basics » Aluminum / Aluminium

Description

In its mineral form, bauxite, aluminium is the most abundant metal in the earth's crust. Mined bauxite is refined into alumina which is smelted into aluminium. A modern material and relative newcomer to the family of commercial metals, aluminium is one of the most useful and important metals.

Trading unit

Priced in U.S. dollars per metric tonne (LME) or U.S. cents per pound (COMEX).

Pricing mechanisms

Global Over-The-Counter market. Spot markets and futures.

Units for delivery

Ingots, T-bars or sows of minimum 99.7% purity with a maximum allowed iron content of 0.2% and a maximum allowable silicon content of 0.1%, according to London Metal Exchange specifications.

Avenues of trade

Aluminium futures trade most actively on the COMEX division of the New York Mercantile Exchange (NYMEX) in contracts of 44,000 pounds. The base metal also trades notably on the London Metal Exchange in 25 metric-tonne contracts.

Contracts for aluminium alloy and North American special aluminium alloy also trade on the LME. Aluminium also is traded in Asia on the Tokyo Commodities Exchange (TOCOM) and Osaka Mercantile Exchange in Japan as well as the Shanghai Futures Exchange in China.

Aluminium also can be traded using exchange traded funds that allow investors to track the metal's price change without the hassle of owning physical aluminium.

Supply

According to BaseMetals.com, aluminium production is spread fairly evenly among major regions, with Europe accounting for one-third of global aluminium supply. The Americas make up 29% of production, and Asian countries account for 24%. Oceania and Africa combine for about 14% of production.

Two thirds of aluminium supply yearly comes from primary production, and about one-third of global supply comes from recycled production, according to the International Aluminium Institute.

The world's largest aluminium producers include Rio Tinto Group Plc, Russia's United Co. Rusal and U.S.-based Alcoa.

Demand

Aluminium is used in various applications, including transportation (automobiles, airplanes, trucks, railcars), packaging (cans, foil), construction (windows, doors, siding, roofs), consumer durables (appliances, cooking utensils, light bulbs), electrical systems and machinery. Aluminium hydroxide is used as an antacid to combat gastric upsets, while aluminium chloride and chlorohydrate is used widely in antiperspirants. Water treatment also uses aluminium sulphate to purify waste water.

Extraction, Processing, Refining & Supply Chain

Bauxite

Bauxite is the mineral form of aluminium, occurring naturally in the earth's crust, and containing about 50% alumina.

It is formed by the weathering of sedimentary rocks which contain a high proportion of aluminium-bearing minerals. Bauxite is normally found in a layer averaging three to five metres deep, located about half a metre beneath the topsoil. Mined bauxite resembles small red pebbles, called pisolites, averaging about five millimetres in diameter.

Mining and processing bauxite

Initially, samples are collected by drilling a series of holes to a depth of 3.5 metres, 75 metres apart in a grid formation. This allows mining engineers to determine where to mine based on the amount of alumina, silica and iron present in the bauxite samples.

Once the area to be mined has been determined, vegetation is removed and the topsoil stripped and taken to be used in an area awaiting regeneration. This topsoil contains beneficial bacteria and organisms that assist newly planted trees to grow over previously mined areas.

Bauxite exists in free-flowing form, which makes it relatively easy to dig out of the ground. Front end loaders load the bauxite into large capacity bottom-dump trucks, which take the ore to a dump station for transportation to the processing plant (called a beneficiation plant) by rail and belt conveyor.

At the beneficiation plant, the bauxite is screened and washed to remove fine particles. It is then placed on stockpiles, which are loaded onto ships. Beneficiated bauxite is transported to a refinery where it is converted into alumina.

Alumina

Alumina is the name given to aluminium oxide (Al2O3), which is extracted from bauxite via a refining process known as the Bayer process. In general, it takes about two tonnes of bauxite to produce one tonne of alumina.

Refining takes place over four main stages:

Digestion: The bauxite is ground in mills and mixed with hot caustic soda at high temperatures and pressure to dissolve alumina in the ore, thus separating it from non-soluble impurities such as silica, iron and titanium compounds in the ore.

Clarification: The caustic soda and alumina solution passes into rows of thickener tanks where solid impurities sink to the bottom as a fine, red mud. The impurities are washed several times with water and disposed of in tailings dams on site. The remaining solution of alumina trihydrate is filtered to make it even clearer.

Precipitation: The alumina trihydrate solution is then cooled, concentrated and stirred in open-top tanks until it forms into crystals. This part of the process can take several days. Pure alumina is added to this mixture to assist with the formation of alumina trihydrate crystals.

Calcination: The crystals are then washed, filtered and heated in gas-fired kilns at temperatures greater than 1100°C to remove water molecules. The final product is a fine, dry, white powder, which is alumina. Alumina is then cooled and stored.

Aluminium

Alumina is composed of both aluminium and oxygen, which is separated during the smelting process to produce aluminium metal. About two tonnes of alumina is required to produce one tonne of aluminium.

The smelting process uses electrical energy to separate the aluminium metal from the oxygen. This occurs in reduction cells, which are large, steel, carbon-lined furnaces. Alumina is fed into the cells where it is dissolved in molten cryolite, a liquid which can dissolve alumina and conduct electricity at 970°C. Electricity is introduced into each cell via carbon anodes - carbon blocks manufactured by the smelters. All reduction cells in a smelter are connected in a series by an aluminium busbar, which carries electrical current to the cells.

A continuous electrical current of 100,000 to 320,000 amps flows from the anode through the alumina/cryolite mixture, to the carbon cell lining, to the anode of the next cell, and so on. This current causes the alumina in the mixture to react with the carbon anode, forming aluminium and carbon dioxide. The aluminium, in molten form, sinks to the bottom of the reduction cell, while the carbon dioxide and other gaseous by products form at the top of the cell. The gases are cleaned to remove contaminants before being released into the atmosphere.

Molten aluminium is siphoned from the bottom of the cell by a process called tapping. The aluminium is then transported to a holding furnace to be cast into products.

Casting takes place in temperatures of just over 700°C. Aluminium is cast into ingots, large blocks, t-bars or long cylindrical logs called extrusion billets. Special ingot casting machines automatically cast, stack, strap and weigh the ingots into one tonne bundles ready for transport. Extrusion billets and t-bars are cast according to customer requirements using a process known as vertical drill chill casting. In these forms, the metal is known as primary aluminium. Primary aluminium can be rolled, extruded or cast to make aluminium end-products.