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ENERGY
As discussed in the Energy
section of this report, the volatility of energy
markets is a key challenge to Alcan as a major aluminum
producer and user of energy. Energy prices have always
been key to the primary aluminum industry. A consensus
is building that we are in for a major shift in the
dynamics of energy markets. Oil and other energy prices
have actually stayed low in real terms since the OPEC
crisis of the 1970s. But a new era of oil shocks is
clearly upon us and the flow-through impact on electricity
prices cannot be far behind. In fact, it is already
being felt in Western Europe and North America as old
power contracts expire. With no long-term contracts
available at a viable price, the future of smelting
in Europe is seriously jeopardized. As Europe has a
favourable mix of energy sources, this situation is
attributable to the artificial price inflation resulting
from the incomplete deregulation of EU energy markets.
The European industry is actively engaged in a search
for solutions with the regulatory authorities and power
producers.
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| Articulated low-floor tramway
named Cobra built by Bombardier Transportation
(Switzerland) Ltd for Zurich Transit Authorities
using structural aluminum components, sandwich
panels and composite driver cabs from Alcan. |
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The key to Alcan's long-term success as a sustainable company
is to ensure that selected investment locations contribute
to long-term sustainability. Due to the long-term nature of
Alcan's investments (the average lifespan of an aluminum smelter
being several decades), remaining competitive in the long
term requires secure supplies of energy. This is particularly
relevant for those energy sources that improve the energy
mix in terms of having lower GHG emissions, thereby also contributing
to the environmental dimension of business group operations.
As discussed earlier in this report, a step in this direction
is the "Gas to Gove" project in the Northern Territory
of Australia that will provide Alcan with an economic and
long-term energy source for its Australian bauxite and alumina
operation. The switch from fuel oil results in improved air
quality and significantly reduced greenhouse gas emissions.
Alcan recognizes the greenhouse gas benefits of natural gas
and is pursuing other long-term agreements with similar economic
and environmental benefits.
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