LME considering aluminum scrap contract

The London Metal Exchange (LME) reportedly is planning new contracts for low-carbon emissions aluminum and for aluminum scrap.

A six-paragraph June 5 Reuters item indicates the low-carbon LME contract is being designed to help aluminum users source “low-carbon aluminum, which is typically produced with hydropower or other forms of renewable energy.”

That contract could help producers meet sustainability goals, and possibly avoid over-reliance on primary aluminum made in China. According to Reuters, about half of global primary aluminum supply “is produced in China, where power is mostly generated by coal-fired plants.”

The same news item reveals the LME also is planning to launch a contract for aluminum scrap. That contract also could have a sustainability peg, since aluminum “can be recycled using a fraction of the electricity of creating new metal,” says Reuters.

The aluminum industry has long touted recycling as an energy-saving technique, sometimes using a figure of 95 percent energy savings compared to the mining-to-finished aluminum production chain. That factoid has left some recyclers wondering why scrap and secondary alloys do not trade at more of a premium to prime product, since the energy savings they provide should offer a significant margin.