European demand for ‘green’ copper increasing; premiums already being paid: sources

A number of sources have told Fastmarkets that there is already demand in Europe for copper with green credentials. Less clear, however, is whether the supply demand balance has created the need for premiums for green copper, and what the future holds for the material

Despite there still being some questions in the air as to what exactly is “green” copper, sources from across the industry noted there are certain areas where demand was present.

Sources highlighted that demand from industries related to green technologies aimed to acquire their raw materials with their carbon footprint in mind.

“[Procurers in] green technology want green copper,” one producer source said. Procurement for things like wind turbines was more likely to focus on green copper than some more traditional industries, the producer added.

Other sources noted similar trends, highlighting that electric vehicle (EV) makers were more particular about using green copper. Sources said that the focus these products have on being green meant that procurement for them was more particular.

Also highlighted by sources was pressure from end users, such as the automotive sector, spreading back through the supply chain, creating change and increasing demand.

“There is pressure [for green copper] from automotive sector,” a consumer source said.

How green is copper demand in Europe?

Sources noted that in Europe there is also public pressure for companies to be environmentally conscious, and this was increasing demand for sustainable sources of copper. The push for greener production “is a pretty big trend in Europe,” a second producer source said.

A third producer source noted that this push may, in part, be due to producers’ focus on their images.

“EU industries understand that being green is an opportunity to improve their image,” the third producer source said.

Some participants commented that demand is less direct but still present, with participants favoring “greener” brands over others, but not necessarily actively pursuing procurement of green copper.

“People ask for low-carbon brands to help meet their low-carbon desires,” one trader source said.

A number of sources also highlighted pressure from original equipment manufacturers (OEMs) to use green copper.

“Many OEMs want both low-CO2 and high recycled content,” the third producer source said. The second producer agreed, saying that they can see a “big difference,” in terms of demand from OEMs.

Not all the sources Fastmarkets spoke with agreed, with a number of sources saying that demand is weak.

“I have heard nothing for now, only producers promoting such an idea,” a second trader source said. A third trader agreed, and said that no one had yet asked for green copper.

One reason that sources said indicated weak demand for green copper was that participants were not all willing to pay premiums for such material. Producers are “trying to extract higher premiums [for green copper],” the first consumer source said, but added that in the current environment with bad demand and challenging macro-economics, these higher premiums are not broadly achievable.

“You know how consumers are – they all want [environmentally friendly products], but what do they buy?” a fourth producer source said. “Human nature unfortunately has high morals before it hits the pocket.”

The first consumer source stated that “those in housing are not willing to buy for one cent more for ‘green’ properties.”

Average consumers do not want the premiums and do not want copper green enough to pay.

“Average consumers do not want the premiums and do not want copper green enough to pay,” the second producer source said. The source added that some “people [are] paying [more for green copper] already,” and that it was down to individual consumers, with some willing and some unwilling to pay extra for green copper.

One end user told Fastmarkets that their company was already paying a premium for green copper.

“We are paying a premium if it is being offered to us and it can be proved [that its green],” the end user source said. The source added that “green copper premiums were already being paid,” adding that a premium was “already in the market.”

The third producer agreed, saying that some people are already offering more to procure green copper.

Roland Harings, chief executive officer of Aurubis, told Fastmarkets in an interview in June that he did not think any premium on green copper would be sustainable, noting that greener brands would receive increased demand, but not necessarily higher prices.

“I don’t think there will be a sustainable premium for green products. We will not rely on or make a business case for green copper premiums,” Harings said. “[The effects of green production] will be indirect, because we will get more business and more demand, and not this extra premium somewhere in the chain.”

Sources noted that if demand crosses a certain threshold and supply can’t meet that demand, we would start to see premiums. “Premiums will come if over 50% of the market needs or want green copper,” the third producer source said.

What’s the future for green copper premiums?

The future potential for green premiums is split, according to sources, who note that demand may increase in the short term but that, ultimately, it is unlikely for premiums to be a long-term feature of the market, while more of the market becomes green.

Sources told Fastmarkets that when demand for green copper increases, a differential will form: “There will be a differential and it will spread, its already started and going fast,” the first trader source said.

The consumer source also noted that, despite them not seeing a need for a green differential at the moment, “[producers] will try to create one.”

Dynamics also have the potential to change, while investors and financial institutions put more pressure on people in the copper industry to be environmentally conscious.

“Investors are getting pickier,” the second producer source said, noting that sustainable loans may play a part in how demand shifts.

Sources also noted that dynamics could shift if there were financial incentives to green copper: “If, in the future, carbon offsets are needed for copper, and the customer saves money using low-carbon, why not ask for more money?” the third producer source said, adding that for other metals like aluminium there are already plans for financial incentives on greener metal. They added that such legislation may be introduced for copper, and this could influence the low-carbon price dynamic.

For aluminium, the market has changed dramatically in the last few years. In May 2021, Fastmarkets launched its aluminium low-carbon differential P1020A, Europe, which sat at $0 per tonne for the first four months. The most recent premium assessment, in contrast, was at $25-40 per tonne on August 4.

Source also noted that the dynamic may move from green premiums for environmentally conscious copper to the inverse, where less environmentally conscious copper loses favor and becomes unpopular. For green copper to happen, “people need to join before the train leaves the station,” the second producer source said.

Harrings echoed this view when talking to Fastmarkets in June, saying, “the whole industry is going to move [toward sustainable production].”

The market seems somewhat split on whether widespread demand exists for green copper, whether it warrants a premium and what a green future would look like for the red metal. It is certain, however, that some participants see a market for the product and that a large percentage of the market is discussing the implications of green copper.

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