Demand for low-carbon aluminium pushes P1020 differential higher

Demand for low-carbon aluminium in Europe has been steadily increasing, and offer prices for 2023 and beyond were steadily rising, market participants told Fastmarkets on Monday, June 6

Sellers said that more consumers were now requesting that their metal be from sustainable production and were happy to pay a premium for that.

“For 2023, we are offering very high numbers because the demand is there, and people want to secure this metal [in the] long term,” a trader said. “If you want green primary aluminium for the whole of next year, you have to pay [a premium of] $30 per tonne or more.”

Other market participants also reported receiving offers for 2023 and onward with a differential of as much as $50 per tonne, while some had signed contracts at premiums closer to $10 per tonne.

For nearby spot business, the differential remained slightly lower but has also increased since the previous month due to tighter supply.

Fastmarkets assessed the aluminium low-carbon differential P1020A, Europe, at $5-15 per tonne on June 1, compared with $0-15 per tonne a month earlier.

Spot offers were heard at $10-30 per tonne while business was heard at $5 per tonne.

For the first time since Fastmarkets started pricing the differentials in March 2021, the majority of the market agreed that $0 per tonne was no longer achievable.

“I think everyone agrees that there is now some kind of premium for the units, even if it is only a couple of dollars,” a second trader said.

“It is not trading at flat, there is demand for low-carbon primary units and the market is still tight,” a producer said.

Underlying P1020A premiums also remained high due to continued tight supply in Europe, and persistent logistics issues.

Fastmarkets assessed its aluminium P1020A premium, in-whs dp Rotterdam, at $590-625 per tonne on June 1. This compared with $235-250 per tonne on June 1 last year.

For value-added products (VAP), most market participants were able to achieve a premium for low-carbon units but the differential remained flat.

Fastmarkets assessed the aluminium low-carbon differential, VAP, Europe, at $20-35 per tonne on June 1, unchanged month on month.

Spot business was reported to Fastmarkets at $20-30 per tonne for aluminium billets.

Some producers continued to offer units at differentials as high as $50 per tonne but deals at these levels were only concluded outside the methodology’s three-month window and for long-term deals.

“The want for low-carbon billets and primary foundry alloys is still strong, but there is more supply than in primary aluminium, so there hasn’t been a lot of movement recently,” a consumer said.

Underlying premiums on aluminium billet have been dipping slightly in recent months due to higher availability in Europe and weaker automotive demand.

But premiums still remained historically high, with the all-in price for consumers still expensive.

Fastmarkets assessed its aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), at $1,470-1,540 per tonne on June 1, down from $1,500-1,570 per tonne at the start of May.

Inferred low-carbon aluminium midpoint calculations

This figure was derived on June 6:
Aluminium P1020A premium, in-whs dup Rotterdam, inferred low-carbon midpoint: $515 per tonne

The below figures were derived on June 1:
Aluminium P1020A premium, in-whs dp Rotterdam, inferred low-carbon midpoint: $617.50 per tonne
Aluminium 6063 extrusion billet premium, ddp Italy (Brescia region), inferred low-carbon midpoint: $1,477.50 per tonne
Aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), inferred low-carbon midpoint: $1,532.50 per tonne

An inferred number is a calculation using existing Fastmarkets numbers. The inferred prices take the midpoint of the underlying premium and adds the midpoint of the relevant low-carbon aluminium differential.

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