Viewpoint - Hydro

28 October 2014



Hydro is one of the world’s leading aluminium producers. Converting Today
spoke with Oliver Bell, the executive vice president for Rolled Products, to
find out about developments and what the future holds.


Converting Today: What is the size of the rolled aluminium market and what are the major challenges ?

Oliver Bell: Hydro Aluminium Rolled Products has produced around 940,000 thousand tonnes of rolled aluminium for key industries in 2013 alone. The biggest challenge facing Hydro remains the high energy costs in Europe and in particular in Germany, where we operate the complete aluminium value chain. Here we have to remain competitive at every step of this value chain, from R&D via production and processing to refining and ultimately recycling, if we want to carry on being successful.

Another topic that preoccupies us is creating better product solutions for key industries such as packaging. In this regard, we are aiming to create innovative processes and products with an eye to energy saving and environmental protection. Lightweight
construction is a key to this.

Which of these challenges is Hydro most active in addressing and how is it doing so?

Staying with the Hydro's ability to be innovative, the clear answer to this question is the close co-operation between our clients and our researchers and developers. Today, we are at the vanguard in every stage of our rolled products process chain. In a good
strategic position and as a cutting edge industry partner with a top class product portfolio, we are setting the course for the
future.

Our early involvement in demanding projects has enabled us to achieve a great deal when it comes to finding individual solutions.

What recent innovation or development are you personally most pleased with?

We are continually gaining new knowledge, for instance, with casting processes, creating rolling slabs with highest purity. Concretely, I can focus on four main innovations for packaging:

¦ To make our materials even more tearproof as well as less likely to deform and better to print, our researchers this year developed a process for degreasing aluminium foils. The chemical process they devised removes any rolling oil, leaving the material as hard as a rolled product should be. At the same time, it is now possible to produce thinner foils:

Rather than the 50 micrometre gauge that has so far been the norm, foils can be made just 15 micrometres thick. This thinness represents a major advantage, especially for foils that are used in insulation or blister packs. And as with many of our enhanced products, it also opens up new fields of application for water-based paint systems rather than the solvent-based alternatives used until
now.

¦ Another milestone in 2014 has been our success in reducing the gauge of effective, protective aseptic foils. These can now be
made 16 percent thinner, bringing the minimum thickness down from the previous 6 micrometres to 5 micrometres today. In terms of width, our foil dimensions of up to 2,200mm remain the benchmark. Gossamer-thin, these foils are nonetheless produced in reliable
processes that help protect both the environment and the climate. Used in packaging for food and drinks, they couldpotentially save some two million tonnes of CO2 a year, as contents remain fresh for several months with no extra energy needed to keep them cool.

¦ Hydro is also renowned as a producer of aluminium strip for cans. Over the last five years, we have raised our production capacity by 40 percent, and our end stock solutions are available in all parts of the world. Our latest development, called brilliEND, has a surface with a special sheen, making us the only provider in the world to offer the kind of extremely pure, bright, shining surface that is proven to appeal more strongly to consumers.

¦ Last but not least, recycling plays a significant role in the value chain for us. At the end of April 2014 we were able to announce an investment of €45 million in a novel recycling plant in the Neuss location. It is an integrated line for processing used beverage cans. In this way, we are staying abreast of the globally growing market for recycled aluminium, particularly in the area of packaging. This contributes to the development of our international competitiveness. Already at the end of 2015 we want to put the plant into operation, with 40 new employees in a 20,000m² area, and then process 100,000 tonnes, double our current capacity. In doing this, we will be able to process a broad spectrum of scrap cans. What's special about this is that we will be able to start using new sensor technology for sorting and separating scrap.

Where do you see the future of the industry - is the future rolled industry going to have fewer players or more?

Despite the fact that the rolling industry is already quite consolidated at least in some regions such as Europe and the US, I think we
will see more consolidation on a long term perspective.

Will it see competition from within or from different substrates, etc?

There will always be a competition between the different materials and the choice will be made by our customers and the consumers. But aluminium has some great answers for the future challenges and requirements due to the intrinsic properties of the material.
Excellent barrier function in packaging applications is preventing food waste, aluminium in cars enables weight savings and reduced carbon dioxide emissions, etcetera. On top, there are the benefits of aluminium recycling. There is no loss of thematerial as it can be used again and again with just 5% of the energy needed in the first production step. Consequently I believe that aluminium and aluminium products have a great future.

How do sustainability and disposal figure in future plans?

End of Life Cycle is a totally logical part of a value chain that never ends. This doesn't just mean that the consumers want to buy green products. We are constantly paying attention to the whole life cycle of aluminium, the material of the future!

Even just our modern recycling plant in Grevenbroich, where we can produce about 100,000 tonnes of recycled aluminium with only 5 percent of the energy used in the production of primary aluminium, plays a significant role in maintaining environmental balance. This eases the burden with regard to the supply situation as well as climate protection.

Aluminium's resource-conserving property makes it an ideal material for several applications. On our way to a society that uses resources efficiently, we have built up a Europe-wide network together with clients and other industry partners in our capacity as Europe's leading manufacturer of rolled aluminium for the packaging industry. In this way, we promote collection and recycling to a significant degree. We intend to continue pursuing this fundamental trend towards sustainable economies in a consistent manner. This has already made us a frequent
leader in our branch in the Dow Jones Sustainability Index and it also encourages us to continue these efforts.

What are the main opportunities for Hydro?

To say it clearly: the packaging industry, because we contribute to safer food. We are the leading partner in antiseptic foils for
beverage cartons, our product protects UHT milk or other beverages even in tropical regions and to keep food fresh for several months without any cooling. This helps avoiding two million tonnes of carbon dioxide every year. Additionally, we made the foil 16 percent thinner, bringing the minimum thickness down from the previous 6 micrometres to 5 micrometres today.

Rather than the 50 micrometre gauge that has so far been the norm, Hydro foils can now be made just 15 micrometres thin for the use of special foils in insulation or pharmaceutical blister packs.

Where do you see the greatest threat?

This is definitely in the energy costs. Our industry is particularly energy-intensive. As most rolled products are produced in Germany, the additional costs coming from the EEG (renewable energy law) place an enormous burden on us. This reduces our international competitiveness, as well as that of Germany as an industrial location.

But also the upcoming regulations on a European level threaten the global competing power of the entire European industry. We see an increasing de-industrialisation in Europe. In recent years the share of the industry on Europe's total GDP has decreased to only 15
percent. This loss of the industrial base means loss of good workplaces and welfare of the society. We can clearly see this when looking at the situation in Southern Europe in comparison with Germany, which still has an industrial core.

If I answer from a different perspective - looking at the economic situation in Europe all additional new regulations should be checked on their impact for the industry on its global competitiveness

Is there a main message or communication you would like to make clear to our readers?

We are the strategic partner in innovative solutions for our rolled products customers. Setting one leap in innovation in each business area a year, and an R&D milestone every three years.

www.hydro.com

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