EU carbon border adjustment adds bullish fuel to fiery Rotterdam aluminium premiums

The European Union's Carbon Border Adjustment Mechanism (CBAM) will be generally supportive of aluminium premiums in Europe and will add further bullish sentiment to an already heated market, sources told Fastmarkets this week.

"A Carbon Border Adjustment Mechanism will put a carbon price on imports of a targeted selection of products to ensure that ambitious climate action in Europe does not lead to 'carbon leakage'," the European Commission said in an official announcement on Wednesday July 14.
"This will ensure that European emissions reductions contribute to [a decline in] global emissions... instead of pushing carbon-intensive production outside Europe. It also aims to encourage industries outside the EU - and our international partners - to take steps in the same direction," it added.
Initially, CBAM will only apply to aluminium, cement, iron & steel, fertilizers and electricity. 
For some market participants, the mechanism is expected to limit the amount of aluminium brands consumers would be willing to take and thus increase the value of low-carbon aluminium production.

"It will lead to higher premiums," a trader in Europe said. "Any tonnes coming in will be adjusted...

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