“We can’t charge more for providing green aluminium right now, but we already know that we have higher sales volume because we produce low-carbon material,” he said.
According to the CEO, however, the lack of willingness to pay for green aluminium might change in the medium-to-long term.
“Currently, there is an available supply of green aluminium for an incipient market, concentrated mainly in the auto sector and end-consumer products, but if this market starts to demand more or other sectors start to [increase] demand, few companies will be prepared to meet this, so there may be a bigger demand for differential premiums for producers like us,” Alves said, adding that currently only 25% of the total global aluminium production is considered green.
Fastmarkets launched its first low-carbon aluminium differentials for Europe in 2021, and for the US in 2023.
The aluminium low-carbon differential P1020A, US Midwest was assessed by Fastmarkets at 0 cents per lb on Friday, September 6. The premium had been at zero since it was launched in December 2023.
Fastmarkets assessed the aluminium low-carbon differential P1020A, Europe at $0.00-30.00 per tonne on September 6, down by 14.29% from $10.00-25.00 per tonne on August 2.
Plans to modernize aluminium production
Currently, CBA’s green material has an emission of 3 tonnes of carbon dioxide (CO2) per tonne of aluminium produced, covering Scope 1 and 2 emissions. They use 100% renewable energy, which comes from hydroelectric power and wind farms. Scope 1 emissions refer to direct emissions generated by an entity or its subsidiaries, while Scope 2 are the indirect emissions from energy used by an organization.
The company is investing to reduce its carbon emissions with new projects to modernize its primary aluminium production.
Some of the new technology will enable the disposal of dry residue in the company’s alumina refinery. The dry residue can have a future usage, like in the construction sector. The bauxite mine tailings and bauxite residue, which are currently stored in waste dams, can be used in the production of building materials and cement, respectively.
In addition, CBA will automate its Salas Forno plant, where it produces liquid aluminium, which will make the process more efficient, with fewer costs and emissions.
Alves highlighted that some companies that are seeking green certification are also increasing scrap consumption, which is contributing to supply tightness in some regions of the world.
In the US, for example, with the US primary aluminium industry lacking renewable-powered electricity sources, it has turned to scrap to decarbonize its aluminium production.
“The US aluminium industry is getting greener not from prime production but from extending its scrap recycling,” Fastmarkets principal consultant Kirstine Veitch said. “That is the US’s route to greening aluminium production in the country.”
CBA participates in the low value-added tax (VAT) aluminium market in Brazil, primarily selling material at a deferred tax in the state of São Paulo.
Fastmarkets assessed the aluminium P1020A premium, low-VAT market, delivered São Paulo region at $260-315 per tonne on September 3, stable from a fortnight earlier.
And Fastmarkets assessed the aluminium P1020A premium, high-VAT market, delivered São Paulo region at $170-220 per tonne on September 3, widening downward from $200-220 a fortnight earlier.
Focus on value-added products
In April, Fastmarkets reported that supply coming from CBA was said to have tightened, helping to boost the P1020A ingot premium. Ingot buyers and traders then reported fewer deliveries, although there have been no major changes in demand or supply.
Sources questioned whether there was a problem in CBA’s production process or whether it was a commercial strategy for the company.
According to Alves, CBA is focused on producing more value-added products (VAP). Their total sales per year is around 500,000 tonnes, with P1020 sales accounting for only 20,000-30,000 tonnes.
“Our demand in Brazil is more healthy for VAP. We will prioritize this chain because we have more long-term customers in it and greater profitability. It’s our choice to sell a smaller volume of ingots P1020,” he said.
Follow discussions around decarbonizing the aluminium industry with the latest price trends, market insights and forecasts with Fastmarkets. Learn more from our dedicated green aluminium hub.
