The aluminium industry before the requirement of green transition

Raw aluminium billet. Illustration

Strengthen linkages to expand the market

Vu Van Phu, Vice President and General Secretary of Vietnam Aluminum Profile Association, said that Vietnam is located in the Asia-Pacific region, representing the largest market and is expected to be the fastest-growing market in the world and the fastest-growing in the next 5 years due to increasing consumption from countries such as China, India and Japan. Therefore, the growth rate of Vietnam's aluminium industry is forecasted to reach 7% per year. Besides, Vietnam is the 4th growing construction market in Asia. With big goals on infrastructure and housing, this is the driving force for the industry's development in the next period.

Currently, there are about 100 aluminium factories, mainly producing aluminium profiles. As a result, aluminium production capacity increased sharply, about 1.2 million tons/year, fully meeting domestic and export demand. However, in recent years, the aluminium industry's capacity has become redundant. Output only reaches 70% of the designed capacity, and the quantity of goods has far exceeded the demand of domestic and export markets. Therefore, according to the Vietnam Aluminum Profile Association leader, "It is necessary to consider the master plan of the aluminium industry, producing pure aluminium and increasing aluminium recycling, accessing "green" materials.

According to experts, in the context that enterprises have developed domestic and export markets, the smooth value chain is a problem in the industry. On the side of the Ministry of Industry and Trade, according to Chu Thang Trung, Deputy Director of the Trade Remedies Department, most new businesses focus on the first and last stages, missing the middle segment of aluminium smelting due to the high production cost. Therefore, linking the value chain of the industry is very important. Regarding the proposal to effectively maintain domestic trade remedies, Chu Thang Trung said that the extension and the anti-dumping duty rate could not be decided arbitrarily but must be based on data. Data, investigation results of authorities and information provided by businesses in the aluminium industry.

Considering that the aluminium industry still has room for development, however, Pham Chau Giang, a senior expert of VinaCapital Foundation, identified the weakness of Vietnam's aluminium industry as Vietnam's aluminium products are quite similar and focus mainly on aluminium profile products, therefore, aluminium industry enterprises mainly compete on price. According to Pham Chau Giang, an advantage of Vietnamese aluminium enterprises is the limit ed number of FDI enterprises participating in this sector. Aluminum is a rather particular product when most of it is still in the hands of domestic enterprises, so businesses need to link together to form strength not only in the domestic market but also towards export.

Green transition avoids the risk of a carbon tax

Pham Thi Ngoc Thuy, Director of the Office of the Research and Development Department of the Private Economy (Board IV - Advisory Council for Administrative Procedure Reform of the Government), emphasized the need to strengthen linkages among aluminium enterprises. Although this is a critical job, if we do not shake hands, all will be exhausted before the competitiveness of FDI enterprises. In addition, Pham Thi Ngoc Thuy also raised the problem that aluminium enterprises face shortly: green transformation.

According to a Board IV representative, businesses may initially think that it is a burden for the greenhouse gas inventory, but international experts analyze it; it is like doing an audit. "When we prove our efforts and transparent data, the prestige and evaluation in the eyes of investors, importers, buyers, green financial credit channels are greatly enhanced," Thuy said.

Pham Chau Giang said that in the next 2-3 years, obstacles for Vietnamese businesses, which for the aluminium industry, are the issue of carbon emissions. Over time, the Government has taken drastic actions to show Vietnam's commitment to becoming carbon neutral by 2050. According to the current roadmap, Pham Chau Giang said that businesses will be in 2027-2028 in the immediate future. Businesses must initially introduce improvements to reduce carbon emissions or face certain taxes and fees. "Especially when exporting to the EU, aluminium is one of the first five industries that must pay a carbon tax if no solutions to reduce carbon emissions are offered. Next, other exporting countries will impose a carbon tax if businesses do not actively convert. That issue cannot be ignored in the coming period," said Giang.

According to experts, the aluminium industry has not been old for a long time, but it has passed a certain period of commercial protection. Therefore, aluminium enterprises must have a management strategy, adapt to the new requirements of green transformation, and identify markets to diversify products. In addition, enterprises can integrate clean energy into production to increase the value of aluminium products. That helps increase the commercial competitiveness of businesses and avoids being taxed on carbon in Europe and the US. In the long term, enterprises must plan for energy transition, use less coal, oil and gas instead, use more renewable energy and collect that data.

Experts say businesses can improve their capacity in greenhouse gas inventory through governance. That is both a measure of the business's maturity and an opportunity to diversify products and improve customer segments. For example, avoid using prices to compete, but use the quality of goods to compete, and put green labels on their products to be more competitive in the international market.