Proposal to launch two aluminium low-carbon differentials for VAP

Fastmarkets proposes to amend the specifications of its low carbon differentials and re-launch them via two new differentials.

These new launches would result in the value-added products being split into one differential for low-carbon aluminium billet as a standalone, with a three-month timing window, and the other differential for low-carbon aluminium value added products excluding billet, with a 12-month timing window.

Specifically, these products would be for primary foundry alloy, wire rod and slab, becoming known as VAP ex-billet.

These changes are being proposed as this group of products tend to be traded on a time frame beyond the current specification, resulting in some reported data points being excluded from the assessment.

The changes also reflect the evolving low-carbon aluminium market place, which has evolved since the launch of the differentials in 2021, and will continue to grow as the industry moves closer towards decarbonization.

The current methodology for the low carbon differentials can be found here.

The proposed specifications are:
Aluminium low-carbon differential VAP-ex billet, Europe, $/tonne
Carbon limit: 4tCO2e per tonne of aluminium produced, Scope 1 and 2 emissions.
Type: Primary foundry alloy, wire rod, slab
Quantity: Min 100 tonnes
Location: Europe
Unit: USD/tonne
Timing: Within 12 months
Publication: Monthly, first Friday of the month, 4pm London
Notes: No billet.

Aluminium low-carbon differential billet, Europe, $/tonne
Carbon limit: 4tCO2e per tonne of aluminium produced, Scope 1 and 2 emissions.
Type: Billet
Quantity: Min 100 tonnes
Location: Europe
Unit: USD/tonne
Timing: Within three months
Publication: Monthly, first Friday of the month, 4pm London
Notes: No other value added products

Fastmarkets will also seek feedback on the current carbon limit of 4tCO2e per tonne of aluminium produced, under Scope 1 and 2 emissions.

If these two new differentials were to launch following the consultation, it would result in the discontinuation for the existing MB-AL-0382 Aluminium low-carbon differential value added product (VAP), Europe, $/tonne, which currently has a three-month window.

The historical data for this differential would remain available on the dashboard for a period of time.

The proposed changes will also impact the calculation of some inferred prices, which are calculated using the midpoint of the underlying premium and the midpoint of the low-carbon aluminium differential.

This would be replaced with the midpoint of the new low-carbon aluminium billet differential, if launched.

The affected inferred prices are:
MB-AL-0379 Aluminium 6063 extrusion billet premium, ddp Italy (Brescia region), inferred low-carbon mid-point, $/tonne
MB-AL-0380 Aluminium 6063 extrusion billet premium, ddp North Germany (Ruhr region), inferred low-carbon midpoint, $/tonne

The proposed changes in this consultation do not impact MB-AL-0381 Aluminium low-carbon differential P1020A, Europe, $/tonne, nor would it impact the P1020A inferred prices, (MB-AL-0377 Aluminium P1020A premium, in-whs dup Rotterdam, inferred low-carbon midpoint, $/tonne; MB-AL-0378 Aluminium P1020A premium, in-whs dp Rotterdam, inferred low-carbon midpoint, $/tonne).

These prices are a part of the Fastmarkets base metals package.

The consultation period for this proposed amendment starts from September 28 and will end on October 27.

The amendment will then take place, subject to market feedback, with the first publication on November 3.

To provide feedback on this price or if you would like to provide price information by becoming a data submitter to this price, please contact Carrie Bone/Imogen Dudman by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Carrie Bone/Imogen Dudman re: Aluminium low-carbon differentials.”

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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