Pain continues for European aluminum buyers

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Just when European aluminum buyers thought the situation could not get any worse, the Russian authorities decided to slap export duties — set at 15% as a base rate or a specific minimum of $254 per ton — on exports of aluminium ingot and billet.

The export tariffs will apply to some 340 nonferrous and steel products, according to the official decree signed last month. For aluminum, it will cover those HS code products starting 760110.

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European aluminum market

aluminum ingot

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The European aluminum market is already extremely tight for semi-finished aluminum products Many mills are booked out until the end of the year. Those that do have capacity for the fourth quarter are further increasing conversion premiums by up to 30% in just the last couple of weeks.

The rising cost of Russian ingot and billet supplies will add to the already elevated Rotterdam delivery premiums. In time, they will add to US Midwest delivery premiums and Main Japanese Port physical delivery premiums.

In Rotterdam, Fastmarkets reported that the P 1020 premium in warehouse duty paid Rotterdam price increased from $250-$260 per ton in late June to $280-$300 per ton last week.

Knock-on effect

Russia is a significant supplier of primary aluminum to Europe and to Asia. Rising physical delivery premiums in these two major markets will inevitably have a knock-on effect on the US Midwest premium. That is regardless of the fact that Russia is not the supplier that it once was of primary metal to North America.

Metal consumers in Europe had been hoping the conversion premiums would begin to ease toward the end of the year as the supply chain got back into some semblance of balance. However, it is becoming increasingly clear that a tight primary supply market, continued robust demand and extending lead times at both flat rolled and extrusion mills will result in high premiums extending well into 2022.

Furthermore, there is little sign of price softening before the end of the year.

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