Proposal to launch two Brazilian aluminium delivered premiums

Fastmarkets proposes to split the current Brazilian aluminium P1020A delivered premium by launching two new domestic premium assessments to better reflect the two-tier market created by the different state value-added tax (VAT) rates, known as the ICMS tax.

The change will result in two aluminium premiums: one for the low-VAT market and another for high-VAT P1020A.

Brazil’s aluminium production capacity increased in 2023, leading the government to end a duty-free quota it had introduced in 2014, essentially deeming the country self-sufficient in terms of primary aluminium production. And with domestic material gaining in importance due to diminishing imports, the difference between ingot sold with low- and high-VAT has become more pronounced.

P1020A ingot from Alumar in the northeastern Maranhão state and from Albras in the northern Pará state, for instance, is usually sold into the São Paulo region with 12% VAT, which is considered the “high-VAT market.” 

Units from Companhia Brasileira de Alumínio (CBA) in São Paulo, meanwhile, along with what is left of aluminium imports, is sold at a deferred rate or 4% VAT, hence the “low-VAT market” denomination.

Fastmarkets’ existing premium assessment — and the two new proposed premium assessments — does not, and would not, actually include VAT or any tax other than import duties where applicable. Sales with 12% VAT are intrinsically transacted at lower premiums to compensate for higher taxes, while material with zero or 4% VAT can be sold at higher premiums.

The proposed specifications are:

Aluminium P1020A premium, low-VAT market, delivered São Paulo region, $/tonne
Quality: P1020A or 99.7% minimum Al purity (Si 0.10% max, Fe 0.20% max) ingot
Quantity: Min 100 tonnes
Location: Delivered in São Paulo region with up to 4% ICMS state tax, duty-paid, VAT removed, premium on top of LME cash prices
Timing: Within 4 weeks
Unit: USD/tonne
Payment terms: Cash against documents (7 days after bill of lading date); other payment terms normalized
Publication: Once every two weeks. Tuesday, 3-4pm London time

Aluminium P1020A premium, high-VAT market, delivered São Paulo region, $/tonne
Quality: P1020A or 99.7% minimum Al purity (Si 0.10% max, Fe 0.20% max) ingot
Quantity: Min 100 tonnes
Location: Delivered in São Paulo region with 12% ICMS state tax, duty-paid, VAT removed, premium on top of LME cash prices
Timing: Within 4 weeks
Unit: USD/tonne
Payment terms: Cash against documents (7 days after bill of lading date); other payment terms normalized
Publication: Once every two weeks. Tuesday, 3-4pm London time

The 30-day consultation period for this proposed launch starts from Wednesday January 31 and will end on Friday March 1. The amendment will then take place, subject to market feedback, on Tuesday March 5.

To provide feedback on these prices or if you would like to provide price information by becoming a data submitter, please contact Letícia Simionato by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Letícia Simionato re: Brazilian aluminium premium assessment.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/methodology.

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