European aluminium buyers are starting to pay up to go green

New York

ALUMINIUM 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 aluminium'' as well as billet and foundry products fetched a premium over standard prices in Europe last 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 tonnes of European raw aluminium traded, with several deals carrying extra premiums of as much as US$14 a tonne, 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 US$12 per tonne.

The ''sharp'' increase in green aluminium purchases are specific to Europe's car industry, according to Harbor. That comes as BMW AG and Emirates Global aluminium PJSC struck a deal worth at least 100 million euros (S$160.7 million) last week for the carmaker to buy 43,000 tonnes per year of aluminium produced using solar power.

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This would be among the first times that consumers and producers agreed to pay a premium on aluminium 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 aluminium.

To be clear, the green aluminium 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 aluminium as such. Companies with low-carbon options include Alcoa Corp, Rio Tinto Group, Norsk Hydro ASA, Emirates Global aluminium and United Co Rusal International PJSC, among others.

''Those who have been able to sell with an upcharge have specific green aluminium brands,'' Mr 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 aluminium in North America, though Mr Vazquez anticipates the region will begin seeing activity as some proposed green initiatives from US 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 aluminium, 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. BLOOMBERG