Over the past two weeks Alcoa (AA) ranked high for overall impact score, prompting us to take a closer look at the Materials sector and what other companies in the ecosystem may be doing. Digging into the data on our Safeguard platform we identified an increase in conversation around a new carbon-free technology that will provide low carbon aluminum to several key players across various industries.
Aluminum has long been prized by manufacturers for its lightweight and durable makeup. It is also a metal that is infinitely recyclable. However, until recently there has not been a great low carbon solution for the smelting process. Digging into the data on our ESG Safeguard platform this week we found that Canadian company ELYSIS announced that their carbon-free technology will begin to roll out for commercial application with the help of a few key partners.
With investment from Alcoa and Rio Tinto (RIO:GB) along with the government of Canada and Quebec, ELYSIS was able to take their technology from a concept in 2018 to a viable solution ready for implementation. The name of the company is a play on words of their process, electrolysis. The technology is not too different from current smelting technology substituting a proprietary inert anode for the traditional carbon anode used in the process. The company even says this technology emits oxygen while eliminating any greenhouse gas emissions. There are other financial incentives for their technology including reductions in operating costs, and increases in the anode’s lifespan.
As the two major investors in this project, Rio Tinto and Alcoa will be the first to pilot this technology. Rio Tinto’s Alma smelter facility in Quebec is going to be the first commercial application of this technology and Alcoa is set to follow shortly. Both companies put in place agreements ahead of time to supply low carbon aluminum based on this technology to major companies. Rio Tinto has a deal in place with ABinBeV while Alcoa has a deal in place with Audi. These two large companies invested in their future together years ago and are now starting to see results, putting aside competition for resiliency.
Elsewhere in the materials sector, LG Chem Ltd. (051910:KR) will begin to roll out bioplastics in South Korea, receiving ISCC certification for their bioproducts value chain. They are the first Korean company to receive certification and are incorporating bioplastic for nine products in their offerings. Neste (NESTE:FI), a Finnish company, is providing LG Chem with bio-diesel for this process.
As two major value chains that produce emissions, metals manufacturers and plastics manufacturers made a dent this week in reducing their footprints. The development of ELYSIS clean technology in Canada is no surprise as Canada has had a carbon tax in place since 2019.
As we discussed in our article last week, there are many companies across different industries that are in favor of a carbon tax. It provides a clear financial incentive for reducing greenhouse gas emissions and will spur companies into action that do business where carbon taxes exist. It is especially important for the Materials sector as they produce many of the inputs that go into a wide range of goods. Reducing the footprint of this space has the potential to reduce the footprint of other industries down the supply chain.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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