26 August 2026 14:37 (UTC+04:00)
Akbar Novruz
Aluminum production is amongst the most energy-intensive
industrial processes on our planet. The principle in the metal
industry is that electricity charges make up some 30–40% of the
price of primary aluminum, meaning that the geography of
competitive aluminum production coincides with the geography of
inexpensive and stable energy. This means that the three
simultaneous blows to the global supply of aluminum from the
destruction of Gulf smelting capacity due to Iranian strikes, the
restriction of Russian exports, and the rise in electricity costs
in Europe that has put a stop to operations at Western aluminum
factories since 2022 have created a niche for producers of aluminum
who have access to low-cost and low-carbon electricity to occupy.
Azerbaijan, operating its Ganja electrolysis facility on
electricity that is supplemented with hydro-power and has the
carbon intensity of 2 tonnes of CO₂ per tonne of metal produced
(versus 13–15 tonnes of CO₂ worldwide), has all the cards in hand
to become one of the most efficient producers of aluminum globally.
The figures of the industry’s January-July 2026 production show
that Baku understands this perfectly well.
The question is whether the 2027-2030 program will allow turning
this understanding into a competitive advantage.
The European Union Carbon Border Adjustment Mechanism came into
force in 2026, and aluminum is one of the sectors most exposed to
this risk. As the logic of the CBAM states, since a European
enterprise pays €50 for each tonne of CO₂ in the context of the EU
Emission Trading System, a company that imports this product and
does not have to pay such expenses on carbon credits in its own
market will have an unfair competitive advantage over the former
company. Therefore, CBAM ensures parity between European and
foreign producers by requiring the latter to obtain carbon
certificates corresponding to the CO₂ emissions level of their
products. In the case of one tonne of aluminum, manufactured with
the world average emissions intensity of 13-15 tons of CO₂, the
cost of CBAM is high and constantly growing. On the contrary, for
Azeraluminium, manufacturing aluminum with the average emissions
level of 2 tons of CO₂ per one tonne of the product (one seventh of
the world average), the cost of CBAM is low.
Azeraluminium is currently engaged in efforts to secure
Azeraluminium is currently engaged in efforts to secure the CBAM carbon certification to help
establish its advantage as a tangible competitive advantage in the
business world through cooperation with the World Bank,
certification companies, and other international organizations. The
CBAM carbon certification, once secured, transforms the company’s
low carbon footprint in production into an advantageous business
card that European buyers who are under the pressure of CBAM
compliance are willing to pay extra money for. At the same time,
the growing capacity of the country in terms of renewable energy
sources, the country plans to have 8 gigawatts of solar and wind
energy by 2032 – ensures that the CBAM advantage is not a one-time
thing.
However, the danger of commodity price windfalls – and the
increase in production by 45.8% and revenues of $97 million in H1
do constitute a windfall of sorts, brought about by crisis-driven
market circumstances which will not last forever – is that they
provide cash flows without building capacity. The State Programme
for the Development of the Mining and Metallurgical Industry
2027–2030, and Ilham Aliyev’s April 2026 decree establishing
Azeraluminium LLC on the foundation of the existing state entity,
represent a deliberate policy choice to use the current market
window to fund structural capacity expansion before the window
closes.
The example of the aluminum industry of Azerbaijan shows a
pattern which should be followed by non-oil diversification
policies throughout the manufacturing industries. A 78.1% share of
oil in total foreign direct investments in 2025, even taking into
account the existence of 9 industrial parks, 5 industrial zones,
148 inhabitants and 11,200 jobs created, demonstrates the
structural problem which the Economic Strategy 2027-2030 is
supposed to solve. Non-oil refining and manufacturing investment
levels in the country are lower in comparison with total investment
volume, while the investment portfolio in industrial zones amounts
to more than 8.7 billion manats. Aluminium production is a rare
case when Azerbaijan has an input advantage due to the use of
low-carbon energy source.
Indeed, the present-day market conditions have turned
Indeed, the present-day market conditions have turned the
competitive edge into reality and commercial reality in ways that
would have been impossible for planners in this industry to
accomplish through subsidies alone. The Iranian attack on the Gulf
smelters, the Russian embargo, and the inflation of energy prices
in Europe have together generated a shortfall in the supply that
would otherwise be covered by existing producers, but at present is
not being addressed. Azerbaijan has become one such producer:
43,772 tonnes produced in seven months, 46,736 tonnes exported,
revenue amounting to $97 million. Whether the 2027-2030 programme
will manage to scale up its production to 100,000 tonnes of annual
electrolysis capacity and 50,000 tonnes of rolled products until
the market becomes normalised – and until European customers find
other long-term suppliers for their needs, which will also seek
CBAM certification – will be a race against time for Baku.
Here we are to serve you with news right now. It does not cost much, but worth your attention.
Choose to support open, independent, quality journalism and subscribe on a monthly basis.
You can also follow AzerNEWS on Twitter @AzerNewsAz or Facebook @AzerNewsNewspaper
Thank you!
Source: www.azernews.az
