European Aluminum Buyers Are Starting to Pay Up to Go Green
(Bloomberg) -- Aluminum producers have long touted more environmentally friendly methods to make the metal as the way of the future, but no one has been willing to pay extra for it -- until now.
Multiple transactions of so-called “green aluminum” as well as billet and foundry products fetched a premium over standard prices in Europe this week, according to researcher Harbor Intelligence.
“The fire has been ignited,” Jorge Vazquez, managing director of the Austin, Texas-based research firm, said in an phone interview. “The fire is not simply a spark -- you’re talking several transactions by major players both on the consumer side and the producer side.”
Almost 200,000 metric tons of European raw aluminum traded, with several deals carrying extra premiums of as much as $14 a ton, the firm said in a note to clients. Some quarterly contracts for billet, which is used in a range of goods including window frames and recreational vehicles, had surcharges of up to $12 per ton.
The “sharp” increase in green aluminum purchases are specific to Europe’s auto industry, according to Harbor. That comes as BMW AG and Emirates Global Aluminum PJSC struck a deal worth at least 100 million euros ($121 million) this week for the automaker to buy 43,000 tons per year of aluminum produced using solar power.
This would be among the first times that consumers and producers agreed to pay a premium on aluminum with a smaller carbon footprint, likely made by tapping renewable power sources such as hydroelectricity or solar to produce the metal. The sales indicate some consumers are willing to pay more for greener aluminum.
To be clear, the green aluminum being sold is the same metal producers and traders have been marketing for years. The difference now is that the producers who use lower carbon-emitting power generation are branding the aluminum as such. Companies with low-carbon options include Alcoa Corp., Rio Tinto Group, Norsk Hydro ASA, Emirates Global Aluminum and United Co. Rusal International PJSC, among others.
“Those who have been able to sell with an upcharge have specific green aluminum brands,” Vazquez said.
Norsk Hydro in December said during an investor event that it started to see customers willing to pay a “green premium” for its Hydro CIRCAL and Hydro REDUXA products. Chief Financial Officer Pal Kildemo said at the time that the company’s sustainability focus will be a differentiator in the years to come in terms of returns.
Harbor Intelligence isn’t seeing any extra charges yet on green aluminum in North America, though Vazquez anticipates the region will begin seeing activity as some proposed green initiatives from U.S. President Joe Biden’s administration kick in.
“It’s a trend we’ve seen from our customers and their customers and end-users,” Alf Barrios, the head of Rio Tinto Aluminum, one of the world’s largest producers, said in a phone interview. “People are asking more and more” about the environmental, social and governance factors behind the materials they buy, he said.
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