Europeans trim Russian aluminium purchases but deals continue

European industrial customers are still buying aluminium from Russia’s Rusal 0486.HK this year, trade data show, but clients are divided on whether to hammer out deals for 2024.

While some have self-sanctioned their engagement with Rusal due to Moscow’s invasion of Ukraine, or are reconsidering their contracts, others are quietly inking 2024 agreements for material they find it hard to source elsewhere, traders and consumers told Reuters.

Rusal is the world’s largest aluminium producer outside China.

Unlike last year when the Fastmarkets aluminium conference declined to register Rusal over the war in Ukraine, the aluminium producer’s sales team are hosting clients in a meeting room at the conference hotel in Barcelona.

Hanging over dealmaking is the prospect of new barriers after Europe’s aluminium industry group considered lobbying for European Union sanctions on Russian aluminium, but not specifically targeting Rusal, according to a document sent to members in July.

EU sanctions are unlikely, said Charles Julien, a lawyer with White and Case in Geneva who specialises in international trade.

“Especially in Europe, Russia is a very significant source of aluminium imports and is still dependant to some extent on Russian products, so I don’t think this will likely change in the future.”

GOOD PROGRESS
Suppliers and consumers are in the middle of the market’s “mating season”, when companies seek to lock in supply deals.

Rusal is making good progress in sealing deals for next year, with demand strongest in the auto and high-voltage cable sectors, Roman Borisov, Rusal’s sales director for EMEA, told Reuters.

Duncan Hobbs, research director at Concord Resources, said: “Rusal has been an important supplier of slabs to the European market and elsewhere for some time and there are fewer alternatives available in that part of the market.”

Aluminium slabs are an interim product that are often rolled into sheets, used in applications such as auto bodies.

Some industrial users must go through a qualification process of up to a year before they can use a new source of material, another barrier to switching suppliers.

The share of Russian unwrought aluminium imports into the European Union declined to 10% in the first six months of 2023 compared with 12% during the whole of last year, figures from Trade Data Monitor showed.

Russian imports into the EU for the first half of 2023 were 320,561 metric tons.

ALTERNATIVE SUPPLIERS
There are plenty of alternative suppliers in the billet market, so Greece’s Alumil, maker of aluminium windows and other industrial products, may stop buying from Rusal.

“We are still receiving Rusal material, but we’ll think a lot before renewing,” said Sotiris Voulgarakis, procurement manager at the family-owned company.

An industrial consumer from France who declined to be named said she was seeking supplies of non-Russian aluminium during the conference due to the concerns of end buyers.

“We don’t really have a problem with it, it’s some of our customers who do and we listen to them,” she said.

Some buyers had stopped purchasing Russian aluminium due to financing issues, a trader said.
“A bank or insurance company in the middle will say hang on a second, this is Russian,” he said.

Critics of Russian metal say it should be banned from London Metal Exchange warehouses because it is now dominating inventories there and distorting prices.

Aluminium stocks of Russian origin in LME-approved warehouses that are available to the market have risen this year to 81% of the total in August, from 41% in January.

Borisov said that the material was providing vital liquidity when inventories were low and the Russian-origin LME stocks at 183,650 metric tons were a fraction of the total aluminium market of about 70 million tons.
Source: Reuters (Reporting by Eric Onstad; Editing by David Holmes)