LME’s ‘green aluminium’ plan faces producer opposition

The London Metal Exchange is facing pushback against its plans to launch a “green aluminium” platform to trade the metal from some of the world’s largest producers.

Norwegian group Norsk Hydro and India’s Hindalco Industries said they both opposed proposals by the LME to allow aluminium with a lower carbon footprint to be traded separately from the standard metal.

Their comments are a blow to efforts by the LME, the world’s centre for industrial metals trading, to establish a separate price for low-carbon aluminium in order to encourage the metal to be produced more sustainably.

The LME said in August that it would launch a separate spot exchange for trading low-carbon metal next year, marking the first time it would be traded based on its environmental footprint in the exchange’s 143-year history. 

Most of the world’s aluminium is produced using coal-fired power or natural gas. Its production is responsible for about 4 per cent of global greenhouse gas emissions making it a critical sector in global efforts to combat climate change.

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The LME hopes that a separate trading venue just for low-carbon aluminium could help determine whether customers are willing to pay a premium for greener metal. That would in turn incentivise the industry to lower its carbon footprint. 

But Hilde Merete Aasheim, chief executive of Norsk Hydro, told the Financial Times that a separate contract for low-carbon aluminium risked weakening standards and its own efforts to decarbonise the energy-intensive industry.

“We are a little bit afraid you will commoditise a specialised product,” Ms Aasheim said. “There are a number of green products out there — you have to be precise about what is your [carbon] content, it’s not one standard calculation.”

Ms Aasheim said Norsk Hydro worried that the LME’s exchange would “bundle” multiple low-carbon standards together and set a threshold for “green aluminium” that was too low.

Norsk Hydro sells aluminium with a carbon footprint of less than 4 kilogrammes of CO2 per kg of aluminium because of its use of hydropower, compared to an average of 8.6kg CO2 for aluminium consumed in Europe and 20kg in China.

Meanwhile, Satish Pai, managing director of Hindalco Industries, said a potential focus on the energy used to produce aluminium ran the risk of overlooking other issues in the supply chain, such as the mining of bauxite.

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“The concept of green aluminium is being hijacked for economic benefits by a few companies,” Mr Pai said. “It’s a concept that needs to be looked at from a holistic environmental and sustainability point of view across the whole value chain.”

“The LME is a place to bring buyers and sellers together [and] they should stick to their mandate,” he added.

The two companies’ positions are at odds with those of En+, the hydropower and metals group formerly controlled by Russian oligarch Oleg Deripaska. The group said last month that the LME should go further and require every aluminium producer to disclose its carbon footprint to the exchange.

“We welcome all views in respect of our proposed sustainability strategy and are considering the feedback we’ve received as part of the discussion paper process,” the LME said.

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