The Zhitong Finance App learned that if the EU bans imports of Russian aluminum in the next few months, European and American buyers will compete fiercely for Middle Eastern aluminum, triggering a rise in prices. According to reports, the European Union has been discussing sanctions to ban aluminum imports from Russia for several months. Sources said that the latest sanctions plan introduced by the EU due to the 2nd anniversary of the outbreak of the Russian-Ukrainian conflict did not include new sanctions against aluminum, but it is expected that the EU will soon propose another new import ban plan.

European and American buyers fighting for aluminum from Middle Eastern countries such as the UAE and Bahrain will increase inflation in the transportation, packaging, and construction industries — industries already facing high raw materials and wage costs.

Aluminum is a key raw material for making electric vehicles. It is much lighter than steel and is now the metal of choice for a large number of electric vehicle components.

According to the International Aluminum Institute (International Aluminum Institute), Middle Eastern producers supplied 6.2 million tons last year, accounting for nearly 9% of global supply. Of this, approximately 2 million tons were shipped to Europe and the United States.

The ban on Russian metals will create a gap of about 500,000 tons in Europe, some of which can be offset by the restart of idle production capacity in the region.

“Middle Eastern suppliers will not be able to quickly and completely make up for the shortage in Europe,” said Dmitri Ceres of American aluminum dealer Perennial.

Aluminum buyers in the spot market pay the London Metal Exchange (LME) price plus a premium covering shipping, handling costs, and taxes.

“Europe's premiums will have to rise to attract metals from other regions, including the US,” Ceres said. America's premium will also have to rise to keep the metal in supply.

Follow LME's reaction

If a new ban is introduced, aluminum prices are unlikely to rise to the level of 2018, when Rusal was sanctioned by the United States.

However, the market's reaction will depend on whether LME decides to ban Russian aluminum due to EU sanctions, as Russian aluminum accounts for 90% of MALSTX-TOTAL inventory at LME registered warehouses.

“If LME's deal no longer accepts Russian aluminum, spot premiums and LME prices are likely to soar sharply given the lack of non-Russian metals in warehouses,” Bank of America analyst Michael Widmer said.

Self-sanctions and the imposition of 200% tariffs on Russian aluminum and aluminum products mean that many US companies have switched from Russia to other countries, including the Middle East.

According to Trade Data Monitor (TDM) data, US aluminum imports from Russia fell to 16,902 tons last year, accounting for 0.4% of the total, compared with 4% in 2022 and nearly 9% in 2018.

In contrast, the EU's aluminum imports from Russia have declined, but the quantity is still significant. According to TDM data, the EU imported 512,122 tons of aluminum from Russia in 2023, accounting for 8% of the total, compared to 12% and 19% in 2022 and 2018, respectively.

David Wilson, an analyst at BNP Paribas, said: “EU sanctions against Russian aluminum will mean a rise in Europe's premium. The US premium will also have to be raised to remain competitive.”

“Europe's premium has risen, and transportation costs to obtain this metal from the Middle East and other Asian countries have also risen due to the Red Sea attacks.”

Last year, the EU imported nearly 1.2 million tons of aluminum from the Middle East, accounting for 18.8% of the total, while the US imported more than 800,000 tons of aluminum from the Middle East, accounting for 19.3% of the total.