Low-carbon aluminium differentials in Europe widen for P1020, VAPs

Low-carbon aluminium differentials in Europe widened in March, with market participants split on how much of a premium can be achieved for the green metal.

Fastmarkets assessed the aluminium low-carbon differential P1020A, Europe at $0-15 per tonne on Friday, April 1, widening by $5 from $0-10 per tonne on Friday, March 4.

A deal was reported to Fastmarkets with a differential of $15 per tonne for a small tonnage.

Russia’s invasion of Ukraine has divided market participants on where they see the differentials.

Some participants note that with some consumers now unable to finance Russian material, there is even less availability of low-carbon aluminium in Europe.

“There should be a high premium for low-carbon units because it is very sparse right now. If a consumer needs low-carbon units and are specific about the origin, they will have to pay up,” a trader said.

Other participants noted that the tight market conditions for primary aluminium in Europe at the moment mean there is not much focus on low-carbon differentials.

“I don’t think people can be that picky. Some people just need metal and they don’t care about low-carbon quality right now. The underlying premiums are so high already,” a second trader said.

“Low carbon is less of a focus; the priority is - and will remain to be - to get metal,” a third trader said.

Market participants varied with their estimations for the P1020 low-carbon differential, from $0 to $30 per tonne.

Underlying premiums remain high. Fastmarkets assessed its aluminium P1020A premium, in-whs dp Rotterdam at $580-610 per tonne on Friday, up by 40% from $410-440 per tonne at the start of 2022.

On value-added products (VAP), underlying premiums also remained at high levels, meaning the low-carbon differential was a very small percentage of the overall costs.

Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region) at $1,500-1,600 per tonne on Friday, unchanged week on week.

Fastmarkets assessed the aluminium low-carbon differential, VAP, Europe at $20-35 per tonne on Friday, widening upward by $5 from $20-30 per tonne the previous month.

Slab and wire rod were able to command a slightly higher low-carbon differential this month than billet and foundry, participants said.

A deal for primary foundry alloy was reported with a $25-per-tonne differential.

Some participants assessed the differential for low-carbon aluminium VAPs as high as $50 per tonne.

“In the future, it will likely be mandatory to have low-carbon products in your book, but automotive is very quiet and demand is for any unit, not low-carbon ones,” a fourth trader said.

“It’s more important for producers to continue to charge a differential. If you’re a producer, you manage your units, but if you’re a trader, you just have to manage your book,” he said.

Participants also told Fastmarkets there was still good long-term demand with some offering out until 2023 for low-carbon units.

Inferred low-carbon aluminium midpoint calculations

The figures below were all derived on April 1:

Aluminium P1020A premium, in-whs dup Rotterdam, inferred low-carbon midpoint: $462.50 per tonne

Aluminium P1020A premium, in-whs dp Rotterdam, inferred low-carbon midpoint: $602.50 per tonne

Aluminium 6063 extrusion billet premium, ddp Italy (Brescia region), inferred low-carbon midpoint: $1,502.50 per tonne

Aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), inferred low-carbon midpoint: $1,577.50 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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