Market participants have noticed a pick-up in interest for low-carbon aluminium in East Asia, with more customers inquiring on it, particularly from the automotive sector.
Most inquiries for low-carbon aluminium are on an annual basis, but some customers do purchase material on a spot basis, Fastmarkets understands.
“With 2024 contract discussions, there’s been a rise in interest for low-carbon units from original equipment manufacturers,” a trader said. “The interest for low-carbon aluminium will only build up in the long run.”
“Market participants have taken an interest in the low-carbon aluminium shift with many aware of the Carbon Border Adjustment Mechanism (CBAM) by the European Union,” a source said.
To respond to this growing interest in the region and to bring transparency to the low-carbon aluminium market on a broader geographical scale, Fastmarkets has launched a low-carbon differential in East Asia. The launch in East Asia follows the November 2023 launch of a low-carbon aluminium differential in US.
Fastmarkets assessed its newly launched aluminium low-carbon differential P1020A, Japan, South Korea at $0-10 per tonne on Friday March 1.
Fastmarkets’ aluminium low-carbon differential P1020A, Japan, South Korea, is applied on top of the underlying aluminium price on the London Metal Exchange and Fastmarkets’ P1020A premium for ingot, t-bar and sow in East Asia.
Find out more about Fastmarkets pricing methodology here.
Readiness to pay for green material mixed
Despite the growing interest in low-carbon aluminium units, the East Asian market’s current readiness to pay an upcharge for low-carbon aluminium remains mixed, with market participants having observed varying degrees of willingness.
“We’re seeing an increase in the number of inquiries for low-carbon aluminium, but if the premium can’t be passed to the end users, we may not proceed with implementation,” a market participant said.
“The main priority for customers in Asia is the price, and low-carbon aluminium is secondary, there’s definitely interest for it, but they are not all willing to pay a premium for it yet,” a second trader said. “It is dependent, but there might be no choice but to pay a premium for it in the future.”
“Premium for low-carbon aluminium is still an issue, no one is willing to pay,” a third trader said.
“It is a still a challenge to get buyers to pay a premium for low-carbon units, even though low-carbon aluminium is scarce in Asia,” a source said.
Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $120-130 per tonne on Friday, up from $100-115 per tonne on Tuesday and from $90-110 per tonne the week before.
The rise in the premium came amid tightness in the market and strong expectations for a higher the second-quarter premium following an initial producer offer at $155 per tonne.
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