Global aluminum prices have spiked following news that the Biden administration is considering an effective ban on aluminum imports from Russia for transportation and construction purposes.
Below are potential scenarios and consequences of any U.S. restrictions.
What is being considered?
The White House is considering a ban on aluminum imports from Russia, raising tariffs on Russian aluminum to a level punitive enough to constitute an effective ban, and imposing sanctions on the Russian aluminum industry.
Rusal is the world’s largest aluminum producer outside of China, with global demand this year estimated at about 70 million tons, of which 6% is supplied by Rusal.
If Rusal sanctions are imposed, the impact will be even greater
The impact would be greater if the sanctions were targeted at Rusal, rather than aluminum transportation, because Rusal is not only a major producer but is involved in the global network of raw material supply chains needed to make aluminum, bauxite and alumina.
President Donald Trump imposed sanctions on Rusal in 2018, but the global fallout led to the sanctions being lifted less than a year later.
The unrest has affected operations in Guinea and Jamaica, smelters in France and elsewhere are having difficulty securing raw material supplies, and the Irish government is considering intervention to protect jobs at Rusal Aughinish Alumina, Rusal’s largest producer of intermediate alumina products.
How much aluminum does the U.S. import from Russia?
Rusal’s results show that the company produced 1.89 million tons of primary aluminum in the first half of 2022, with Europe as its largest customer, accounting for 40 percent of its sales revenue.
The company said in March that Western sanctions could delay investment and hit profitability, and in August that the conflict had caused costs to soar.
Morgan Stanley (Morgan Stanley) said in a report that the United States imported 242,000 tons of aluminum from Russia last year, accounting for 4.4 percent of U.S. demand.
Reuters (Reuters) from the United Nations (United Nations) Comtrade database compiled trade data show that the U.S. aluminum imports from Russia increased this year, up nearly one-fifth to 146,553 tons in the first seven months.
The price response
The benchmark price of copper on the London Metal Exchange (LME) spiked 7 percent to $2,400 a ton Wednesday when news broke of a possible U.S. ban, but fell back from its high to trade around $2,370 Thursday.
That price was down 42 percent from the record high of $4,073.50 touched in early March, when the market first worried that Russia’s invasion of Ukraine would trigger sanctions and reduced supplies.
Analysts say prices are unlikely to return to record highs as all industrial metals prices have fallen sharply in recent months on market expectations that a global recession will dampen demand.
In 2018, when the U.S. sanctioned Rusal, LME prices soared 35% in less than two weeks to $2,718 a ton, the highest level in nearly seven years.
What happens to Russia’s metals?
Analysts say Rusal may be able to redirect the flow of money from the U.S., but the sanctions may make other buyers wary of buying the materials.
Some companies, such as Novelis and Norsk Hydro, have already declined to use Russian metal in next year’s contracts, while other consumers are considering their options.
The LME last week released a discussion paper on the possibility of banning Russian aluminum, nickel and copper from trading and storage in its system.
China, the world’s largest aluminum producer, could become a major destination for Russian aluminum under U.S. sanctions.
Edward Meir, an analyst at ED&F Man, said, “China may decide to buy Russian aluminum that is more readily available and at an appropriate discount, while exporting its own metal to other markets, including the West.”
Large quantities of unwanted Russian-produced copper have been stored in LME-approved warehouses in Germany, the Netherlands and Taiwan since mid-September, two people familiar with the matter said.
Post time: Oct-15-2022