How will the Russian aluminum ban affect the domestic and foreign aluminum markets?

The United States is considering sanctions on Russian aluminum products, which triggered a surge in London aluminum prices overnight, and Shanghai aluminum, although the intraday rally, but weaker than Lun aluminum.”Outside strong inside weak” difference makes the price difference inside and outside the aluminum market significantly expanded. So, how will the Russian aluminum ban affect the domestic and foreign aluminum markets, such as china aluminium profile, aluminium casement window,aluminium beading and so on ?
According to the comprehensive analysis, under the background of the current European energy crisis and the vulnerability of the overseas aluminum industry chain and supply chain, once the sanctions are implemented, the overseas aluminum market supply gap is difficult to be effectively supplemented, and the already fragile market may be further disturbed. For domestic, domestic aluminum market supply and demand is relatively more flexible, the impact is relatively limited. Referring to the impact of the previous abnormal Lun nickel price fluctuations, analysts suggest that domestic enterprises still need to pay attention to prevent the risk of price fluctuations.

Sanctions frequently disrupt overseas aluminum supplies

The US government is reportedly considering sanctions on imports of Rusal. The options of the US government’s options include a complete ban on imports of Russo, raising taxes high enough to constitute an effective ban, or to sanction Russo, the report said. The news sparked international concerns about reduced aluminum supply, and lun aluminum futures rose more than 7% at one point.
In fact, in the past two years, the global aluminum market has been repeatedly affected by sanctions and related large fluctuations. Following the rumor of the ban, the London Metal Exchange confirmed in late September that it was considering a ban on Russian metals, driving up related metal prices in London, with London aluminium up nearly 8%. Earlier in 2018, the price surged 30 percent during Treasury sanctions against Rusal.
Russia is second only to China’s largest aluminum producer, accounting for about 5-6 percent of the global aluminum supply, and even in the US, which accounts for about 10 percent of the American aluminum imports.”Russia was the third-largest aluminum importer of the United States in August.”Gu Fangda, head of research and consulting at Guosen Futures, said the Russian aluminum ban could have a broad impact on the global aluminum trading market, forcing consumers in the United States and other countries to find alternative metals.
In addition to the shutdown of some local aluminum smelters due to the European energy crisis, and the regional fragmentation and mismatch of overseas markets caused by the sanctions of Europe and America to Russia, the market expectations of the overseas aluminum supply tightening are more consistent.”In the overseas energy crisis and supply chain vulnerability highlights the background, aluminum industry chain, especially the production and trade link encountered unprecedented severe challenges, due to Europe and America further sanctions on Russian metal may increase regional fragmentation and supply and demand mismatch, overseas free circulation of metal raw materials prices or will be sharply higher, and presents the aluminum represented by the nonferrous metal supply and demand ‘outside tight inside loose’ ‘outside strong inside weak’ pattern.”Mr.Gu said

Fan Rui, chief analyst of Guoyuan Futures, also believes that the impact of the US sanctions on Rusal is not to be underestimated, but in terms of the specific impact, there may be some differences between domestic and foreign countries. Fan Rui specific analysis said that in terms of the international market, from the current report, the US sanctions options may include three options, and the most direct impact is that the major aluminum importers will be cautious, or even look for alternatives from other countries. At the same time, the London Metal Exchange is still discussing whether Russian metals should be banned from entering the exchange, limiting the supply of aluminum available to companies in the international market if the US sanctions are announced. In addition, the current lun aluminum inventory is at a historically low level, and the domestic dual-carbon policy is being implemented, and the European smelters are facing unstable energy supply factors and rising electricity prices, “I am afraid that it is difficult to effectively supplement the gap in the short term”.

Wang Xianwei, a senior researcher at Citic Construction Investment Futures, also said that Russia’s electrolytic aluminum production capacity accounts for about 12 percent of its overseas supply, and the electrolytic aluminum sold to the United States accounted for 10 percent of its sales in 2021. If the United States imposes sanctions on it, it will have a big impact on aluminum trade in Europe and the United States, but the impact on prices may be relatively limited. He explained that on the one hand, the Russian aluminum ingot trading has been somewhat suppressed after the conflict between Russia and Ukraine, and that overseas demand continues to decline, so the impact on aluminum prices is relatively limited.
However, the market is still having some concerns about this, specific performance in the recent large number of overseas aluminum ingot spot delivery, LME inventory appeared significant accumulation. Some Rusal holders are concerned about the hand spot subsequently facing the threat of banning trading, so they choose to deliver a large number of LME disk, to dispose of the hand spot.”Mr.Wang Xianwei added. Exchange data also showed that aluminum ories rose another 15,625 tonnes on Oct. 13, after surging more than 10,000 tonnes the previous day, with Klang warehouses the biggest increase.

china anodized aluminum profile toughness highlights
So will the aluminum ban affect the domestic market? Comprehensive analysis, based on the “relative independence” of the domestic aluminum market supply and demand, the impact of the Russian aluminum ban on the domestic aluminum prices may not be obvious.
First of all, from the market previously worried about a large number of domestic problems, Shanghai nonferrous Metals network (SMM) analysis pointed out that in 2022, the domestic electrolytic aluminum gradually resumed production, the import window is in a closed state. Although Russia has always been an important importer of domestic aluminum ingots, but with the supplement of domestic operating capacity, domestic self-sufficiency rate is high, aluminum price is weak and strong, imported aluminum ingots to maintain losses, a large amount of  Russian aluminum into China is not likely, the fourth quarter or still maintain a small amount of imports
Second, from the perspective of the domestic aluminum market structure, Fan Rui told Xinhua Finance that China itself is the world’s largest aluminum supplier, and the domestic exchange inventory is relatively stable, there is sufficient buffer ability to deal with market risks.

“Domestic nonferrous supply and demand has stronger toughness and elasticity, especially nonferrous metals aluminum tax problem internal and external contact is not strong, so the LME aluminum surge in Shanghai aluminum futures too big, but considering the domestic local outbreak and energy supply threat, some nonferrous production enterprises face production, cost and order delivery difficulties, and domestic aluminum inventory is at historically low levels, investors should in October and November near delivery nonferrous contracts may change contingency plan, suggest capital management and risk control, ready for move in month in advance, actively reduce and the threat of the potential market volatility amplification.”Mr.Gu suggested.

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Post time: Oct-14-2022