Global regulations or economic frameworks are needed to make green metal sales viable as the cost of decarbonization rises, according to major miners.
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With little progress made in this respect by governments at the United Nations' COP26 Climate Change Conference last month, it may be up to industry to develop frameworks involving charging premiums for low-carbon products to bear decarbonization costs, the miners indicated.
Price providers are currently working to establish a market for premiums, for instance in low or zero-carbon aluminum, which will become more formalized once exchanges offer trading contracts in differentiated green products.
"We could get contracts with customers (for green nickel) but need an economic framework that makes it viable," said Anton Berlin, global head of sales at major Russian nickel, cobalt and platinum producer Norilsk Nickel (Nornickel), at a recent press briefing. The framework is necessary because so-called green nickel is currently sold in relatively small quantities and at a premium, he indicated.
Nornickel's premium was quoted end-November at $793/mt, on a London Metal Exchange cash nickel price averaging $19,957/mt for the month.
Nornickel's "green" Class 1 nickel currently has a carbon footprint averaging 8 mt of CO2 per metric ton of metal produced, compared to an industry average of 13 mt/CO2 per mt of metal, while some producers' works emit as much as 160 mt/CO2 per mt of metal, he said.
This year Nornickel will produce between 8,000 mt and 9,000 mt of carbon neutral nickel – 5% of the company's total output – via offsets it has created, Berlin added.
Framework could help cost pass-down
Green aluminum producer En+ Group's executive chairman Gregory Barker has declared himself a proponent of green free trade, or tariff-free trade on low-carbon products, which could make low-carbon products more affordable than high-carbon products, thus creating a low-carbon market.
Nornickel's Berlin nonetheless considers "it is essential to charge the premium as the product has higher costs and creates more value for downstream users. It is is not a new product, it is a better version of a well-established product."
But "Unless you can pass the incremental cost [of green metals] down the value chain it doesn't work," hence the need for regulation or framework in this area, he said. Car prices may usually be fixed for about one year, potentially making it more difficult to pass on any fluctuations in green premiums in the automotive sector after an annual metals supply price has been contracted.
Policymakers support needed in battery metals
Benedikt Sobotka, co-chair of the Global Battery Alliance, a multistakeholder initiative for establishing a sustainable battery value chain, and CEO of diversified miner Eurasian Resources Group, said in a statement sent to S&P Global Platts that policymakers across the globe need to support establishment of a sustainable battery value chain that can be scaled up to meet future demand for metals including nickel, copper, cobalt and lithium for the electric vehicles sector.
"A governance framework will be critical, along with responsible sourcing and circularity through verified data and digital traceability systems," Sobotka wrote. "To realize ambitious climate goals, policymakers – in alignment with the private sector – need to agree on harmonized principles."
Trading contracts in low-carbon metals may be expected to be introduced on exchanges such as the London Metal Exchange once markets and product qualities for these commodities are better defined. Currently, however, the volumes of trade in green metals means "it may not make sense yet" to trade them on platforms such as the LME, Nornickel's Berlin said.
On the grounds that the industry is not yet ready for such a development, the LME this year postponed a potential launch of a much-discussed low-carbon aluminum contract, which could potentially have taken liquidity from its existing aluminum contract.
Low, zero carbon aluminum assessments
Platts launched low-emissions and carbon-accounted aluminum assessments In April, on both duty paid and unpaid material, reflecting an increasing recognition of the role of green metals in global decarbonization. Producers including Alcoa, Century, Norsk Hydro, Rio Tinto and Rusal (En+), have taken an innovatory lead in low-carbon aluminum production to slash carbon emissions.
On Dec. 9 Platts assessed the low-carbon GW premium unpaid in-warehouse Rotterdam at $230-245/mt, with the zero-carbon GW premium unpaid in-warehouse Rotterdam aluminum assessment at $262.60-277.60, down 60 cents/mt on the day. This compared to an LME high-grade cash aluminum price of $2,630/mt-$2,630.50/mt, up $4.75/mt on the day.