European industry pushes to define ‘green copper’ despite the challenge supply chain complexity poses

Copper market participants in Europe have become increasingly interested in 'green' material, with some consumers focusing procurement on environmentally conscious copper

Switzerland-based electrical equipment manufacturer ABB earlier this year announced a commitment to procuring low-carbon copper.

But despite growing demand for lower-carbon metal, there is still strong debate regarding what ‘green copper‘ is.

Fastmarkets has been told by a wide range of market participants that defining ‘green copper’ is challenging due to complexities with the supply chain.

A producer source said that:

Social issues are a ‘yes’ or ‘no’ question, but on carbon it is a sliding scale.

They note that having a flat green premium would be unrepresentative because even within ‘green copper’ production the carbon footprint can vary massively.

But industry participants believe that definitions for low-carbon production are becoming clearer and easier to measure.

For example, European producer Boliden recently launched its own range of low-carbon copper products, defining it as metal produced with less than 1.5 kilograms of CO2 per kg of copper.

By comparison, the most recent data from the International Copper Association (ICA) and Copper Alliance puts the average carbon intensity of refined copper production at 4.6 tonnes per tonne of copper produced.

Of the 4.6 tonnes of CO2 per tonne of copper produced, 70% was generated by mining, 23% from smelting and refining and the remaining 7% from transport and in the end-of-life treatment of sold products.

Sources said that production in Europe was closer to 2 tonnes of CO2 per tonne of copper produced on average, with participants suggesting that levels between 1.5-4 tonnes of carbon produced per tonne of copper produced should be seen as low or ‘lower’ carbon.

Various sources stated that industry groups like the ICA would be best placed to define industry-wide standards.

“ICA has put this on the agenda; we need to clearly define, who is counting and who is accounting for what, in the supply chain,” a second producer source said.

Complex supply chains pose challenges

But participants commented on the energy intensity of the whole supply chain, noting that mining and shipping play a large role in the carbon footprint of copper production.

Most participants noted, therefore, that any hypothetical green copper premium should look at the entire supply chain and not just the smelting process.

There are also challenges in regard to how to count carbon emissions from various aspects of the supply chain, participants said, with no firm consensus on how to count those associated with mining, trucking, shipping, and other aspects of the supply chain.

In aluminium, the focus on the carbon intensity of smelting activities alleviates this particular concern.

Sources also noted that the complexity of the copper supply chain also poses challenges.

Participants told Fastmarkets that when they buy products like wire rod, they have very little transparency on the broader supply chain.

“If we look at wire rod, for example, it can be made from four brands of cathode, and that cathode is made from concentrates from multiple mines. So, how do we accurately compare to other producers?” one consumer said.

Producers also raised concerns about what to include in copper’s carbon footprint.

“We do not use carbon credits or offsets,” a third producer source said, adding that there was no consensus on whether counting such offsets or not would be correct when measuring footprint.

Recycling can solve many issues

Market participants agreed broadly that the ultimate focus of any ‘green copper’ premiums should be on the carbon intensity of the manufacturing process, not recycling, although it remains closely tied.

“Low carbon is the focus, but recycled material is seen as linked,” a trader told Fastmarkets.

Sources broadly agreed that proving recycled content is seen as easier than proving carbon footprint and recycled content also implies lower carbon intensity. The first producer source said:

It is hard to verify if something is green as it is a question for the entire supply chain – mining, shipping… it is quicker and easier to ask about recycled content.

Various sources also noted that recycled content covered other social and environmental concerns that consumers may have.

Participants said copper that has been recycled in Europe is less likely to be associated with ecological damage or human rights concerns when compared with mined copper.

One end-consumer source, who has set internal targets for meeting a large percentage of their copper demand with recycled content, told Fastmarkets, “For us recycling takes care of both [carbon footprint and environmental, social, and corporate governance (ESG) concerns].”

Participants noted various levels as targets with regard to recycled content being considered “green”, with more than 30%, 40%, and 50% all raised as targets that consumers are aiming for.

But despite its perceived benefits, the broad consensus was that recycling is not the ultimate aim for the industry and that it cannot cover the needs of the coming copper demand, especially with the need for more copper in energy transition materials in the coming years.

“Recycled [copper] isn’t a long-term solution as it will all sell out very soon and quickly,” the first producer source said.

“There is a significant increase in demand for copper overall, which cannot be [met] by recycling [alone]. Recycling can play a role, but we need to have more primary copper being extracted and refined,” Aurubis chief executive officer Roland Harings told Fastmarkets in an interview in June.

Low-carbon premiums maturing for aluminium

Fastmarkets launched low-carbon differentials for aluminium and value-added products (VAP) in March 2021 following calls for greater transparency in the area and a heightened focus on low-carbon production across the region.

Fastmarkets’ specifications for low-carbon aluminium in Europe currently include metal produced with a maximum of 4 tonnes of CO2 equivalent per tonne of aluminium produced, outlined in the Green House Gas Protocol Scope 1 and 2 emissions.

The upcharge for both low-carbon P1020 and VAP has been rising over recent months, with participants noting limited availability to meet growing demand.

Fastmarkets’ monthly assessment of the aluminium low-carbon differential P1020A, Europe was $25-40 per tonne on July 7, rising from $20-40 per tonne one month earlier and marking the highest level since the differential was launched.

The London Metal Exchange has also taken steps to increase focus on sustainability among LME listed brands of metal, including copper. Currently the responsible sourcing guidelines have limited focus on carbon footprint, but the exchange has said that it will delist brands which do not comply with its broader sustainable sourcing policy.

The LME passport also allows metal brands to openly list a number of sustainability criteria, including data related to carbon emissions. A part of the metal industry like the LME creating procedures for listing carbon intensity of metal production shows the broad trend is gaining some traction in the industry.

Imogen Dudman in London contributed to this report.

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