Weak demand continues to pressure low-carbon differential for aluminium billet

The aluminium low-carbon differential for value-added products (VAPs) continued its decline in the month to Friday December 2, with weak demand pressuring both underlying premiums and the low-carbon differential

Fastmarkets assessed the aluminium low-carbon differential value-added product, Europe at $5-25 per tonne on Friday, the lowest level since August 2021, and falling from $20-30 per tonne on November 4.

Participants noted that a low-carbon upcharge for aluminium billet was particularly difficult to achieve, due to weak spot demand and falling underlying premiums.

Any deal for billet is a good deal right now

European trader

Fastmarkets assessed the aluminium 6063 extrusion billet premium, ddp Italy (Brescia region) at $720-750 per tonne on December 2, falling from $750-810 per tonne the previous week.

The underlying premium is now at its lowest level since March 2021 and is 51% lower than the record high of $1,500-1,570 per tonne in February.

“If you struggle to sell billet without a [low-carbon] upcharge, you certainly will struggle to sell it with one,” a second trader said.

“It’s a different story in the longer term, we are still negotiating low-carbon differentials for 2023 contracts, but the billet demand is so weak in the near term, it’s difficult to validate a differential right now,” they added.

But low-carbon differentials for other aluminium VAPs, such as primary foundry alloy, slab or wire rod, were still achievable at $20 per tonne and above, supporting the high end of the range.

“It depends what product it is, but for some there is still quite a good differential for green, and consumers do still rely on this,” a third trader said.

Fastmarkets assessed the aluminium low-carbon differential P1020A, Europe at $10-30 per tonne on December 2, unchanged from the previous session.

Demand remained strong for low-carbon primary aluminium in Europe, and there were a number of offers in the market for 2023 at $30 per tonne.

Participants told Fastmarkets they had also signed 2023 floating deals using the Fastmarkets low-carbon aluminium differential.

The low-carbon differential for primary aluminium remains at its highest level since Fastmarkets launched the assessment.

Primary aluminium premiums in Europe have been under significant pressure since the summer but edged up on Friday, for the first time since April 29.

Fastmarkets assessed its benchmark aluminium P1020A premium, in-whs dp Rotterdam at $230-265 per tonne on Friday, up from $230-260 per tonne on Tuesday November 29. It had previously been unchanged since November 15.

Inferred low-carbon aluminium midpoint calculations

Aluminium P1020A premium, in-whs dup Rotterdam, inferred low-carbon midpoint: $220 per tonne
Aluminium P1020A premium, in-whs dp Rotterdam, inferred low-carbon midpoint: $267.50 per tonne
Aluminium 6063 extrusion billet premium, ddp Italy (Brescia region), inferred low-carbon midpoint: $765 per tonne
Aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), inferred low-carbon midpoint: $790 per tonne

An inferred price is a calculation using existing Fastmarkets prices. 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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