Despite rising volumes of lower carbon metal over the past few years, premiums for lower carbon emission-intensive material remain constrained by uneven adoption and continue to be shaped by conventional market forces, sources told Fastmarkets. Payment of a premium remains selective and has tended to occur mainly where regulation, reputational considerations or customer mandates make it difficult to avoid.
Low carbon pricing remains closely tied to broader supply‑demand dynamics and generally moves in line with outages, inventory shifts and macroeconomic cycles rather than independently of them. Decarbonization value, for now, continues to sit within traditional market logic. When demand for metal is subdued, buyers have shown limited appetite for paying more for material they require in smaller volumes, even where lower emissions offer supply‑chain benefits.
At the same time, global momentum to decarbonize metals supply chains continues to build, albeit at a slower and quieter pace than seen earlier in the development of these markets, according to sources.
Regulation is tightening, with measures such as the European Industrial Accelerator Act and the introduction of the Carbon Border Adjustment Mechanism from 2026. Producers continue to invest in lower‑emission production routes, while procurement teams are increasingly required to engage with emissions data associated with the materials they purchase.
Lower carbon emission pricing is most established in steel and aluminium markets. Fastmarkets launched its first low carbon differential in 2021, starting with aluminium, followed by a reduced carbon steel differential in 2023 and a low carbon nickel differential in 2024.
The term “differential” is central to how these markets function. Differentials to conventional, or “grey”, material have ranged from $100 per tonne to $0 per tonne, according to Fastmarkets data. Lower‑carbon metal has therefore not consistently attracted a premium, with price spreads remaining wide and, for most metals, an industry‑wide definition of what constitutes “green” material still lacking.
The “pioneering days”, as some industry sources describe the period four to three years ago when lower‑emission product ranges began appearing across producer portfolios, have since been shaped by rising geopolitical tensions and broader economic weakness.
Commodity price volatility over recent years has weighed on the development of the lower carbon emission marketplace, particularly when it comes to willingness to pay among buyers without clear regulatory or contractual requirements. Despite these headwinds, Fastmarkets data suggests these markets have continued to expand quietly – not in value terms, but in terms of volume.
Since the introduction of low carbon differentials in aluminium and steel in 2021 and 2023, Fastmarkets has observed these differentials extend into additional product segments across value chains and into a wider range of regions.
Lower carbon emission premiums therefore remain present in the market, but they have largely been paid where buyers face regulatory, customer or contractual pressure to do so, rather than on a discretionary basis.
A survey by McKinsey found that by 2030 buyers expect demand for green materials – including ferrous, base and battery metals, as well as glass and plastics – to increase by between 1.7 and 4.5 times current levels, depending on the material.
Looking at what this growth in demand could mean for pricing, Fastmarkets Research forecasts volumes of low carbon material to scale up significantly by 2035. Green steel production in Europe is forecast to reach around 15.9 million tonnes by 2035, rising from less than 1% of flat steel output in 2025 to more than 20% by 2035.
As lower carbon material scales up, it is expected to move from being a niche offering towards becoming more commonplace within supply chains, with the price difference between “green” and “grey” material gradually narrowing over the longer term, according to Fastmarkets Research.
Upcharges for low carbon metals may therefore prove more transitional than initially anticipated. Over time, the role of differentials may be less about delivering a distinct return on investment and more about reflecting the gradual normalization of a lower‑emission metals supply chain – unfolding steadily rather than suddenly.
