Rusal earning a small premium for low-carbon aluminium - EN+

LONDON (Reuters) - Russia’s Rusal is earning a small premium for its low-carbon aluminium, Gregory Barker, the chairman of its major shareholder EN+, said, despite current industry resistance to paying higher prices for less polluting metal.

Aluminium ingots are seen stored at the foundry shop of the Rusal Krasnoyarsk aluminium smelter in Krasnoyarsk, Russia October 3, 2018. Picture taken October 3, 2018. REUTERS/Ilya Naymushin

Aluminium consumers in the transport, packaging and construction industries looking to cut their carbon footprint want to source low-carbon material, but most are reluctant to pay a premium, aluminium industry sources say.

Barker declined to quantify the premium Rusal, the world’s top producer of aluminium, is getting above market prices for the metal.

“There are premiums, but they are small,” Barker said in an interview for this week’s Reuters Events: Global Energy Transition conference.

He said higher-carbon aluminium would eventually change hands at significant discounts “because the cost of the carbon is going to be implicit in the selling price of the metal”.

Barker said production of Rusal’s low-carbon aluminium emitted less than 2.5 tonnes of carbon per tonne compared with some Chinese aluminium with a carbon footprint “north of 16.50 tonnes per tonne”.

Energy produced using coal can account for 40% of aluminium production costs in China.

China is the world’s largest producer of aluminium, accounting for about 57% of the global total of 65.3 million tonnes last year, International Aluminium Institute data showed.

Hong Kong-listed Rusal, in which EN+ holds a nearly 57% stake, is planning to spin off its higher carbon assets into a separate company early next year.

“We will immediately pass back the 57% of the new company that EN+ receives in the de-merged company to our shareholders,” Barker said in response to a question on what EN+ plans to do with its stake.

“The new company will be listed in Moscow. Our shareholders can sell their shares there.”

Major EN+ shareholders are Russian tycoon Oleg Deripaska, with around a 45% stake, and commodity trader and miner Glencore, which holds more than 10%.

Rusal will change its name to AL+ as part of the demerger process, which it hopes will help it achieve carbon neutrality by 2050.

Barker declined to share details of negotiations EN+ is having about the future of its coal-fired power plants and mines.

On the European Union’s plans for a carbon tax on imports from countries with easier carbon emissions standards, Barker said he was worried about unintended consequences.

“A simpler way would be to zero-rate low-carbon aluminium at the point of entry,” Barker said.

For more on the Reuters Global Energy Transition conference, please click here - here

Reporting by Pratima Desai; additional reporting by Anastasia Lyrchikova; editing by Veronica Brown and xxx