Trafigura launches $500 million funding platform for low-carbon aluminium

(Reuters) - Commodities trader Trafigura said on Tuesday it has launched a financing platform of up to $500 million for low-carbon aluminium with lenders Natixis SA CNAT.PA and Rabobank, riding on the trend towards sustainable metal production.

Trafigura said in a statement that the platform will enable the trading house to access finances at a preferential interest rate and pay a premium to low-carbon aluminium producers.

Although energy-intensive, aluminium is vital for the transition to a low-carbon economy, including in the auto sector where it is valued for being lighter than steel and infinitely recyclable.

Trafigura's move is part of a growing trend among major energy and commodity traders such as Vitol VITOLV.UL or Hartree Partners to adapt their business models to the energy transition.

“Our objectives are to secure long-term low-carbon aluminium supply for our customers, to support the efforts of our business partners as they invest in decarbonisation and ultimately to create efficient linkages between suppliers and end-users,” said Philippe Muller, Global Head of Aluminium and Alumina Trading, Trafigura.

The London Metal Exchange, the global bourse for industrial metals including aluminium, has plans for a spot trading platform for low-carbon aluminium and a register where producers can voluntarily log their metal’s carbon-related details.

The aluminium industry, one of the metals sector’s largest emitters of greenhouse gas, is struggling to adopt common standards on greener processing as rivals focus on promoting their own products rather than the wider green market.

Amid a lack of official market definition of low-carbon aluminium, Trafigura and the banks have set out parameters for low-carbon aluminium production, with reference to existing recommendations and standards including those from the EU Technical Expert Group on Sustainable Finance and the Aluminium Stewardship Initiative.

“We’re already seeing increased demand for low-carbon aluminium particularly from the European automotive industry and the packaging industry worldwide,” Muller added.

Reporting by Mai Nguyen, Editing by Sherry Jacob-Phillips