US ALUMINUM SERIES: New Year, new decarbonization goals for global aluminum industry

The dawn of a New Year drives many to make resolutions for change and improvement. And the aluminum industry appears no different in its resolve to advance decarbonization efforts in 2024.

The International Aluminum Institute recently launched an initiative to provide a more transparent and public tracking of greenhouse gas emissions among its global members. IAI said it will issue annual public reports on the industry's overall emissions, and member companies will report their own progress on reducing CO2 at specific facilities annually.

In addition to guiding investment in new equipment and technology critical to cutting carbon, the London-based trade group says the initiative aims to assist IAI members in setting long-term emissions reduction targets and action plans by the end of this year. The effort could include an overall commitment to reach net-zero emissions by 2050, as reported by Platts -- part of S&P Global Commodity Insights.

"The aluminum industry is committed to rapidly reducing greenhouse gas emissions and acknowledges that investment and action is required to achieve global goals," IAI Secretary General Miles Prosser said in a statement, adding that the initiative "will drive ambition and action to decarbonize aluminum supply chains."

The reporting program is supported by industry players from across the globe, including Aluminerie Alouette, Aluminium Bahrain, Alcoa, Alumina Ltd, Companhia Brasileira de Aluminio, Emirates Global Aluminum, Hindalco, Norsk Hydro, Mitsubishi Corp, Rio Tinto Aluminum, Rusal, Sohar Aluminum and South32.

The growing focus on decarbonization, as well as high interest among market participants in low-carbon price assessments, drove Platts to expand its portfolio of global carbon-accounted metals price offerings to include US primary aluminum in early January.

Decarbonization drives interest in pricing tools

Effective Jan. 2, Platts launched a new daily US Low-Carbon Aluminum Premium (US-LCAP) to reflect any differential being achieved over standard material for the spot trade of minimum 99.7% high-grade P1020 with total certified emissions of 4-mt equivalent (mte) or less of CO2/mt of aluminum.

US-LCAP, which complements low-carbon primary aluminum and billet assessments previously launched by Platts in Europe, covers direct and indirect emissions associated with aluminum smelting, typically considered by market participants as scope 1 and 2 emissions.

Those emissions must be certified by an internationally accepted, independent organization. Market participants are expected to supply proof of such certification upon request. Trade using offsets to reduce overall emissions profiles, such as credits sourced from voluntary carbon markets, is not considered for inclusion.

US-LCAP is the latest in a series of low-carbon aluminum and carbon-accounted steel assessments Platts has launched as part of a focus on ESG-related commodities pricing. Market participants have been clear they're seeking tools to help manage risks and opportunities associated with a growing emphasis on carbon-reduction strategies and increasing global regulation.

Low-carbon premiums emerging

While it's early days for US-LCAP and a measurable premium has yet to emerge for spot sales of low-carbon aluminum in the US, Platts European LCAP and low-carbon billet assessments have shown differentials being achieved for such material in that region.

While spot demand for primary aluminum in Europe in general remains soft, sellers say they've seen a growing willingness among buyers to lock in low-carbon volumes as part of longer-term contracts. Indications for spot upcharges have been clustered around $25/mt for primary aluminum, but liquidity remains thin, according to market participants.

Growing commitment among buyers to reduce their carbon footprints, alongside limited availability of low-carbon units that's been exacerbated by continued self-sanctioning of Russian-origin aluminum, resulted in one recent upcharge for European primary material at $50/mt for a medium-sized buy to be delivered over the first quarter, Platts reported.

For low-carbon European billet, spot surcharges of up to $20/mt have been reported in recent months, but deal flows are limited, as sources said most buyers are unwilling to pay more for low-carbon material when premiums for standard material, as well as demand, remain weak.

US market participants -- from producers to end-users -- say it's only a matter of time for similar spot premiums to emerge in America, as well.

Beyond billet and primary aluminum

Metals' global decarbonization efforts are not limited to finished materials.

Scrap and alloys will play a vital role, as well, and market participants have expressed strong desire for all elements of the energy transition story to be told.

That led Platts in December to expand its US nonferrous offerings to include new clean wheel scrap and A356.2 aluminum alloy assessments, complementing a host of well-established US nonferrous scrap and alloys price offerings. Both clean wheel scrap and A356.2 have seen usage and interest rise, as end-users seek more components made with recycled materials -- but also as electric vehicles grab increasing automotive market share.

In addition, Platts launched a new assessment in January for European high-grade aluminum auto shred, also known as floated fragmentizer scrap.

Scrap recycling is on IAI's list of New Year's resolutions, as well. Separate from its reporting and transparency scheme, the trade organization also announced late in 2023 it was supporting an initiative backed by stakeholders at the recent UN Climate Change Conference, or COP28, in Dubai to achieve 100% recycling rates for all aluminum beverage cans by 2050.

"Together, we are calling for greater commitment from national governments and the aluminum beverage can value chain industry to accelerate beverage can recycling rates, with at least an 80% target by 2030 and near 100% by 2050," said Marlen Bertram, director of scenarios and forecast at IAI.

The IAI's efforts to decarbonize show its commitment to change and improvement in 2024.

If there's one thing that's clear about New Year's resolutions, when real commitment is part of them, results typically follow.

More from the US Aluminum Series:

Post-consumer scrap taking larger role in supply for green demand

Market eyes 2024 for demand rebound

Low-carbon demand in focus as green premiums find footing