Factbox: LME-linked group sets first sustainable aluminium, copper premiums

Norsk Hydro ASA

Mon 13:05

Oct 19 (Reuters) - A pricing agency for sustainable metals linked to the London Metal Exchange published its first premiums in recent weeks for copper and aluminium.
Below are details of the first premiums from Commodity Pricing and Analysis Ltd, owned by the parent of the LME, how it calculated them and reaction from some producers.

ZERO COPPER PREMIUM
CPAL on October 1 published on the LME Insight website a zero premium for sustainable copper which meets sustainability factors and has 4 metric tons or less of carbon emissions per ton of metal over the usual premium in Rotterdam for LME Grade A metal of $130 to $180 a ton. 
Premiums are on top of the LME futures price.
"Market feedback indicated limited evidence of an incremental premium for sustainable copper cathode over standard Grade A material," it said.
In terms of carbon emissions, however, 4 tons is the global average for refined copper, according to the International Copper Association, and several firms market copper with much lower levels. 
Austrian smelter Montanwerke Brixlegg is offering copper with 0.63 metric tons of carbon per ton of metal for a premium of €398 ($446) a ton for 2027.
"Actual green cathodes command a substantial green premium over regular cathodes," an official of Brixlegg told Reuters.
Data provider Fastmarkets uses 1.5 tons of carbon emissions for its low-carbon premium of $363 per ton.

ALUMINIUM IN LINE WITH RIVALS
CPAL released on September 24 its first premium for aluminium meeting a range of sustainability criteria and having 8 metric tons or less of carbon emissions per ton of metal at $25-$35 a ton in Rotterdam. 
That is over the standard premium of $445-$470 per ton for P1020A metal, which is high-purity aluminium.
That was largely in line with established assessments, such as Fastmarkets premium for low-carbon metal at $22.50 a ton, even though it uses a much lower threshold of 4 tons of carbon per ton of metal.
European producer Hydro NHY.OL told Reuters that the CPAL launch was "an interesting step", but most current premiums are established through bilateral agreements.
"Any benchmark will need clear and robust definitions and sufficient underlying market activity to be representative."

METHODOLOGY
Under methodology created early this year by CPAL, the primary input it aimed to use to create sustainable premiums was executed trades from spot platforms or bilateral transactions.
Last year, the LME announced a collaboration with online trading platform Metalshub, which it said would provide trading data to an independent agency to create robust premiums for sustainable metals, but so far this has not materialised.
A second tier of data would be firm bids and offers on trading platforms, and a third category was market assessments, but those were deemed less transparent and verifiable.  
CPAL said the first two premium prices for copper and aluminium were based on the third category, as neither trades nor firm bids/offers on trading platforms were available.
($1 = 0.8921 euros)

 (Reporting by Eric Onstad; Editing by Jan Harvey)
 ((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO; Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))