A major aluminum producer is targeting a low carbon upcharge of between $30/mt and $40/mt in annual contract negotiations for value-added products, according to sources close to the negotiations.
A specific low carbon upcharge is now a key feature of contractual negotiations, which began in earnest this week.
“The discussions aren’t about whether there is an upcharge anymore,” one source said. “It’s about what is the upcharge.”
There has been a major focus during 2021 on low carbon aluminum — aluminum originating from a smelter powered by hydroelectric power. The carbon emissions profile of low carbon aluminum tends to be less than 4tCO2/tAl at the smelter, compared with the global average of 13.4tCO2/tAl.
Multiple producers have reported to Platts that they have successfully achieved upcharges on value-added products in the range of $10-$20/mt throughout 2021. Upcharges have been mostly achieved in the billet market, where the upcharge makes up a smaller percentage of the overall cost. Platts assessed the price of billet delivered in Germany at a $1,300/mt over the London Metal Exchange Aug. 27.
Sources close to the deals have reported to Platts that a $40/mt upcharge has been achieved on an annual billet contract and a $30/mt upcharge has been achieved on a wire rod spot transaction to a “European mid-tier cable manufacturer.”
Platts was also told that there have been internal discussions at the company about altering the low carbon metal pricing strategy to reflect a percentage of the all-in price of aluminum instead of an upcharge.
Low carbon premiums are yet to be heard in the spot market for P1020. Platts assessed its LCAP P1020 assessment flat to the standard P1020 assessment Aug. 27. It is expected that premiums will begin to emerge in the coming months, as traders start to acquire more low carbon metal.
A trader told Platts of bidding $20/mt for low-carbon P1020 but was unsuccessful. The trader later reported continuing to look to secure low-carbon units.
Source: Platts