OSLO (Reuters) - Norwegian aluminium producer Norsk Hydro (NHY.OL) launched a low-carbon brand on Thursday and predicted that customers ranging from carmakers to packaging firms will pay a premium to help slow climate change.
Rivals Alcoa (AA.N), Rio Tinto (RIO.L) and Rusal (0486.HK) have previously started to seek higher prices for aluminium made at smelters run on renewable hydro-power, rather than high-emissions fossil fuels..
Norsk Hydro produces two-thirds of its aluminium from hydro-powered smelters and Chief Executive Officer Svein Richard Brandtzaeg said there was a nascent demand for less polluting brands of the metal, which is also lighter than steel.
“Customers are not only looking for aluminium due to the lightweighting opportunities but are looking for aluminium with a lower carbon footprint,” he told Reuters.
“There is a demand and customers are also willing to pay a premium for these products,” he said, predicting it would be attractive in businesses such as packaging, construction and cars, especially in Europe.
Under the scheme, Hydro will guarantee that a tonne of aluminium needed a maximum of four tonnes of carbon dioxide emissions to produce, from mining of the raw material bauxite to smelting and casting.
That would be half the world average of eight tonnes of carbon dioxide and far less than 18 tonnes from coal-fired smelters in China and Australia, Brandtzaeg said. Hydro’s average carbon footprint is now 5.8 tonnes.
He declined to say how large a premium Hydro would charge or how many tonnes Hydro expected to sell under the new standard, especially when Hydro’s production is already cleaner than the world average.
Hydro also launched another type of low-carbon aluminium guaranteed to include at least 75 percent post-consumer scrap. Recycled aluminium requires only five percent of the energy used to mine and make the metal from scratch.
Demand for the 75 percent recycled product could be in industries such as construction. Impurities in recycled aluminium meant the 75 percent standard would be unsuitable, for instance, for some car parts.
Brandtzaeg said he did not feel Hydro was lagging its rivals in introducing low-carbon standards.
“This is still an early stage in the market,” he said. Hydro, among the world’s top 10 aluminium producers, has worldwide primary production capacity of 2.1 million tonnes.
“We can potentially have quite a big portion of our production certified” under the new four tonnes standard, he said. “But initially we will start with smaller volumes.” The standards will be verified by classification society DNV GL.
The possibility of wider pricing of carbon emissions, under the 2015 Paris climate agreement, could make aluminium based on hydro-power more attractive. U.S. President Donald Trump, however, plans to quit the 195-nation plan.
“While the total demand for these products is still limited, we believe it will develop over time,” Brandtzaeg said.
Brandtzaeg said there was widening grassroots awareness of climate change and noted that British retailer Marks & Spencer lists the carbon footprint on products such as food that includes aluminium packaging.
And electric carmakers, for instance, want to curb emissions to offset the high carbon footprint required to produce batteries.
Additional reporting by Peter Hobson, editing by David Evans