Interest grows for low-carbon aluminium in East Asia, but willingness to pay premium mixed

The rising interest for low-carbon primary aluminium within East Asia is clear, although its ability to command a premium remains uncertain, according to market participants

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.

To understand the complex market conditions influencing price volatility, download our monthly base metals price forecast, including the latest copper price forecasts today. Get a free sample.

What to read next
Brazil's aluminium industry is further enhancing its sustainability by boosting renewable energy use and recycling, while mitigating risk from high-carbon imports
German copper producer Aurubis is among the least likely to consider reducing capacity despite record low treatment charges (TCs), according to its chief executive officer
European copper demand, particularly for wire rod, remains strong and seems to be outpacing broader macro-economic growth in the region, the chief executive officer of German producer Aurubis has said.
The process to place the smaller and less efficient of the two processing plants at Los Bronces on care and maintenance is expected to be completed by mid-2024 and comes as the company pushes value over volume, the chief executive officer of Anglo American Chile said
The near-term prospects for Chinese copper smelting capacity amid near-zero treatment charges (TCs) will, to a certain extent, depend on plants’ exposure to spot TCs, the chief executive officer of Rio Tinto’s copper division said on Tuesday, April 16
Take a look at the five key talking points across the aluminium raw material markets ahead of Fastmarkets’ Bauxite & Alumina Conference