Aluminum (Rusal PR photo)
The aluminum metal is the latest casualty of global economic winds, with prices falling amid an apparent boycott of Russian aluminum and soaring operating costs.
Earlier this week, aluminum stocks on the London Metal Exchange (LME) soared, fueling fears of an inevitable return to aluminum of Russian origin. The White House is preparing and is already considering a ban on aluminum imports from the Russian manufacturer Rosal.
“It was very disappointing for the poor aluminum market to see kind of a double whammy from weakening global demand, in China in particular, but also Russia dumping aluminum into the global market,” Wolfe Research mining and metals analyst Tamana Tanners told CNBC yesterday (Thursday). So definitely this quarter reflected those challenges.”
The next quarter does not bode well either – unless some action is taken to stop the potential consequences of Russian-origin metal imports and increase Chinese demand, both in infrastructure development and property construction, Tanners added.
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So far, there are no signs that Chinese demand may improve quickly given that President Xi Jinping signaled at the Communist Party meeting in Beijing that China will stick to its tough coronavirus policy, she added.
And many in Europe also face higher operating costs, mainly due to rising electricity prices, Tanners said. “Electricity is about 30% of the total costs of an aluminum welding plant, so they’ve just been completely pushed out in some of the European operations,” Tanners said.
Any flow of Russian aluminum into LME warehouses also presents a more complex problem, and if the US does proceed with sanctions against Russian producer Rosal, it could have implications for global aluminum supply chains.
Rosal is not only a large producer of primary aluminum (9% of global supply) it is also embedded in a global supply chain needed to produce the metal, bauxite and alumina. “Rosal’s sanctions in 2018 affected operations in Guinea and Jamaica, while smelters in Europe struggled to secure supplies of raw materials,” she added.
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