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

Last Updated: 2022-04-11

Aluminium prices rose sharply in London overnight as the US considered sanctions against Russian aluminium prodsucts. Although Shanghai aluminum intraday gains but underperformed LAL. The difference between “external strength and medium strength” makes the difference between inside and outside the aluminum market enlarge obviously. So, the Rusal ban on domestic and foreign aluminum markets will have what impact?

In the context of the current energy crisis in Europe and the fragility of the overseas aluminum industry chain and supply chain, once sanctions are imposed, the supply gap in the overseas aluminum market will be difficult to be effectively replenished, and the already fragile market may be further disrupted. On the domestic front, the supply and demand of the domestic aluminum market are relatively more flexible and the impact is relatively limited. Referring to the impact of abnormal nickel price fluctuations, analysts suggest that domestic enterprises still need to pay attention to the risk of price fluctuations.

The domestic aluminum market is highly resilient.

So will Rusal’s ban affect the domestic market? Based on the “relative independence” of domestic aluminum market supply and demand, Rusal’s ban may not have an obvious impact on domestic aluminum prices.

First of all, from the market’s previous concerns about Rusal’s large inflow into China, Shanghai Nonferrous Network (SMM) analysis pointed out that domestic electrolytic aluminum will gradually resume prodsuction in 2022, and the import window will be closed. Although Russia has always been an important importer of domestic aluminum ingot, with the addition of domestic operating capacity, the domestic self-sufficiency rate is high, the aluminum price is weak inside and strong outside and the import of aluminum ingot continues to suffer losses, so it is unlikely that Russian aluminum will flow into China in large quantities. Imports will remain small in the fourth quarter.

Second, from the perspective of the domestic aluminum market pattern, Fan Rui told Xinhua Finance that China itself is the world’s largest aluminum supplier, the domestic exchange is relatively stable, and there is enough buffer capacity to deal with market risks.

“The domestic non-ferrous metal supply and demand are more elastic and elastic, especially the non-ferrous metal aluminum due to the tax issue of the internal and external link is weak, so the LME aluminum boom did not cause too much to promote Shanghai aluminum futures. However, given the threat of the local epidemic and domestic energy supply, some non-ferrous prodsuction enterprises are facing prodsuction cuts, cost increases, and order delivery difficulties, and the domestic aluminum market inventory is also at a historic low. Investors should plan for possible changes to non-ferrous metal contracts for delivery in October and November. It is suggested to do a good job in capital management and risk control.

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