Commodity Watch: The Aluminium Artery Wiring the Future

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" data-fr-image-pasted="true" src="/getContentAsset/e4db1c4c-2687-44cd-adbd-db1eb849e5d2/cb87803a-320c-480f-ab75-7b9029eaaf79/Ahmad-Al-Sati-new.jpg?language=en" alt="Ahmad Al Sati" title="Ahmad Al Sati" class="fr-fic fr-dii" style="width: 180px"></div><span style="font-size: 12px"><div class="col"><strong>AHMAD AL-SATI<br></strong>PORTFOLIO MANAGER<br><br><p>Ahmad is the President and portfolio manager for Gemcorp Capital Advisors LLC, based in New York.&nbsp;<br><br>Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser.&nbsp;</p></div></span></div><hr><p>The Belo Monte Dam in the North Region of Brazil is the fifth-largest hydroelectric dam in the world generating about 11 GW of electricity. However, electricity is needed in the south, over 1,500 miles away (the equivalent distance between New York and Denver). To meet the demand, Brazil built the Belo Monte UHVDC Bipole II line (the longest transmission line globally) using 4,500 towers through 80 cities to transmit 4 GW of electricity to 22 million Brazilian homes.</p><p>Although the longest, the Belo Monte UHVDC Bipole II line is not unique. Increasingly, countries and utilities are building transmission lines to move electricity from where it can be produced, cheaply and reliably, to where it is most needed. In 2021, Norway and Germany built a two-way transmission cable that links a Norwegian hydro plant to wind farms in Germany, allowing electricity to flow both ways and for hydro to act as a backup battery to wind farms. The 400-mile line provides power for 3.5 million homes.</p><p>As energy is increasingly produced from heterogeneous sources (traditional and renewable) and demand for electricity continues to rise, moving megawatts across large expanses reliably and efficiently is vital. Effective transmission either inter- or intra-grid improves resilience and reliability and lowers bottlenecks. In turn, lower prices benefit consumers. One study found that a $10 billion investment in transmission lines resulted in a $37 billion benefit over 20 years. Effective transmission can also resolve NIMBY “Not In My Back Yard” objections. For example, nuclear reactors can be built in remote areas and electricity transferred to high-density, high-demand zones.</p><p>Building transmission lines is materially intensive with conductive wires as the primary component. These metal wires must be strung for hundreds of feet between towers for long distances (lines are only economic if the transmission distance is longer than 37 miles). To be effective, the wires should be conductive, lightweight, strong, non-corrosive, relatively inexpensive and malleable. Aluminium meets all these criteria. It is the 4th most conductive metal (after silver, copper, and gold), but it is cheaper, lighter and stronger.</p><p>Yet, aluminium has its own supply chain dynamics. Producing aluminium requires a lot of cheap energy – a new smelter consumes as much electricity as Boston. Thus, it is produced where energy is inexpensive (such as Canada, Russia and the UAE) and must then be procured or recycled across relevant trade routes. For example, the US imports 37% of its aluminium from Canada.</p><p>At the same time, demand for aluminium wires is increasing. Today, over 40 new transmission projects are installing 11,000 miles of wire to transfer 90 GW of electricity. Trade or supply disruptions of aluminium could thus have a significant impact on electricity distribution globally. Investing in trade channels, production and recycling capabilities will be key to meeting the future needs of a world increasingly reliant on distributed electricity.</p>