Aluminum prices back on the rise as Australia bans alumina exports to Russia
After spiking dramatically following Russia’s invasion of Ukraine, aluminum prices eased back from highs of over $3,500 per metric ton on the LME to around $3,300.
The market played a game of wait-and-see over a potential negotiated outcome to the conflict and to better judge just how bad the squeeze on aluminum supply would be.
As the markets continue to respond to developments from the Russia-Ukraine war (and elsewhere), keep track of aluminum prices and MetalMiner buying strategies in the MetalMiner Insights platform.
Aluminum prices surge amid invasion, market tightness
Russia’s Rusal is a major global supplier of refined aluminium. The company produces some 6% of global supply. Of that, some 41% would normally find a home in the European market.
The region’s reliance on Russian supplies had been increasing over the winter. High natural gas prices pushed up energy costs. Those higher costs resulted in the partial closure of some west European smelters.
Set against a backdrop of dwindling LME exchange inventory — down to some 700,000 tons, the lowest since 2007 — and similarly reduced off-warrant inventory, the market was already extremely tight before the invasion. That tightness could be seen in the high Rotterdam delivery premium.
The MetalMiner team will break down the impacts of Russia’s invasion of Ukraine on metals markets, including aluminum prices, during a webinar scheduled for Wednesday, March 30.
Sanctions impact
Sanctions on Russia have been at the forefront of the market’s focus since the invasion began.
Each report of new sanctions resulted in considerable volatility in aluminum prices.
This week the market took a break to the upside again following a potentially major development from the other side of the world.
Australia has banned exports of alumina to Russia, Reuters reported. The move denies Rusal of its second-largest raw material supply source. Rusal’s largest source is the now-closed Nikolaev alumina refinery in Ukraine.
Rusal’s 4 million tons of refined aluminum capacity needs some 8 million tons of alumina. The firm’s domestic alumina plants are only able to meet some 37% of its requirements, Reuters reported.
Rusal’s giant 1.9 million tons per annum Aughinish alumina refinery in Ireland is also at risk. Currently, it is still supplying product. However, the European Union is gradually extending sanctions in the metals arena with a ban on steel imports. The E.U. may be tempted to follow Australia’s lead banning alumina exports in short order.
Nor will China be likely to ride to Rusal’s aid in any meaningful way.
China is a net importer of alumina for its own smelters. Its smelters are now ramping up output as the country eases power restrictions. Furthermore, export demand for China’s semi-finished products is increasing to replace lost Russian supply.
The market’s reaction, with prices now back over $3,550 per metric ton yesterday, is understandable. In turn, physical delivery premiums for ingot and billets will likely also rise.
One of Europe’s leading billet producers, Trimet, has just announced a halving of production at its Essen plant due to huge power cost increases. That move will surely result in further escalation of billet premiums and, hence, extrusion prices across the European market.
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