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En+ issued a warning Oct. 14 noting the harmful consequences that could ensue from recent speculation that the US government is considering actions to block aluminum imports from Russia.
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"Irresponsible market speculation of this sort only benefits our competitors who have publicly advocated for restricting our market access but hurts the American consumer and the US economy, risking more than 164,000 direct and 470,000 indirect jobs in potentially affected downstream industries," En+ Chairman Christopher Burnham said in a statement.
En+ holds a controlling stake in Rusal, one of the world's largest aluminum producers ex-China with an annual production capacity of 3.9 million mt. Rusal is an integrated producer with global operations that include bauxite mining and alumina refining.
"[The speculation] hurts customers too, potentially adding thousands of dollars to the prices of cars and trucks," Burnham added.
Burnham issued his statement following an Oct. 12 Bloomberg article reporting that the US was mulling possible options to target Russian aluminum as it continues to take economic actions against the country in response to its invasion of Ukraine. The alleged options involve a possible ban on aluminum imports from Russia, a spike in tariff rates on Russian-origin aluminum, or the imposition of sanctions on Rusal.
"The article is simply wrong," he said. "We remain in full compliance with [the Office of Foreign Assets Control] requirements including the 'Terms of Removal' agreed in 2018, and we are committed to fulfilling our contracts in the US and worldwide."
The US previously placed sanctions on Rusal in 2018. Burnham said LME aluminum prices jumped 29% in 2018 following the sanctions and "there was a scramble to find alternative material by US manufacturers."
"The company has in the past raised its concern over growing escalation in Ukraine and supports the restoration/establishment of peace in the region," he added.
A representative for OFAC or the Treasury Department was not immediately available for comment Oct. 14.
The London Metal Exchange three-months aluminum contract closing price climbed from $2,236/mt Oct. 11 to $2,305/mt Oct. 12 and $2,359.50/mt Oct. 13 as speculation on the potential US import ban spread through the global market.
Premiums in the US, however, have not yet been affected. The Platts spot P1020 US Aluminum Transaction Premium was assessed at 20.65 cents/lb plus LME cash, delivered Midwest, Oct. 13, down from 20.70 cents/lb the previous day, according to S&P Global Commodity Insights data.
The Platts weekly upcharge assessment for US 6063 aluminum billet also fell to 21 cents/lb Oct. 13 from 23 cents/lb last week.
Sentiment was mixed at midweek as some market participants viewed the potential ban on Russian aluminum imports and the resulting higher LME price as positive for the market, while other market players said they foresaw minimal impact from a possible Russian ban as little Russian P1020 has been entering the US. Sources noted, however, that any action would likely have a bigger impact on the US billet market.
The US-based Aluminum Association said it would support "any and all efforts deemed necessary by the US government and its NATO allies to address the ongoing crisis in Ukraine" but explained that the domestic industry has already worked to reduce Russian aluminum imports since the 2018 round of sanctions.
"While the US does still import some primary aluminum from Russia, previous sanctions in 2018 significantly reduced US reliance on Russian metal from nearly 15% of primary aluminum supply in 2016/2017 to around 5% today," the association said in a statement sent to S&P Global Oct. 12.
The US imported about 192,000 mt of primary aluminum from Russia in 2021, accounting for just over 5% of the total 3.64 million mt of primary aluminum imported that year, according to US Commerce Department data. While Russia was the third largest exporter of primary aluminum to the US in 2021, imports from the country were far behind the 2.54 million mt and 354,000 mt shipped from Canada and the United Arab Emirates.
In the first half of this year, the US imported about 120,000 mt of primary aluminum from Russia out of 2.12 million mt in total imports.
The US is heavily reliant on primary aluminum imports from Canada and other countries, as most of its domestic industry is situated in downstream processing such as rolling and die casting. Primary aluminum production in the US totaled only 880,000 mt in 2021 (about a quarter of the import total) across six operating smelters, according to US Geological Survey data.
Several US aluminum companies, such as Alcoa and Arconic, as well as other metals companies like ATI, already announced actions earlier this year to reduce or cease business relations with Russia-based companies.
Rusal's US division, Rusal America, also split from its parent company in April when former Rusal America executives formed a new US-based company, PerenniAL, to buy out the US business segment.
Previous US duty spike on Russian aluminum
US President Joe Biden signed a bill in April to suspend normal trade relations with Russia, a move which increased duties on dozens of imported metals from Russia. For instance, the bill triggered an 18.5% duty rate on unwrought alloy and non-alloy aluminum and an 11% duty on high-purity aluminum. The duties were piled on in addition to other existing duties such as the 10% Section 232 tariff.
Burnham said US wire and cable producers are "already suffering by paying an inflated price for Russian origin wire rods with a 45% duty," adding that these products are key for decarbonization initiatives due to their application in solar and wind energy projects.
Market speculation in the US builds on an Oct. 6 announcement from the LME that it would start examining industry sentiment regarding the flow of Russia-origin metal in its warehouses in the wake of expectations that market participants may increasingly reject these products as 2023 contract negotiations progress.
Possible actions that the LME could enact include introducing volume thresholds for Russian metal inventories in LME warehouses or suspending warranting for Russian metal in its global warehouses.
As it looks to respond to changing market dynamics, Rusal said Oct. 11 that it had appointed new personnel in key sales and marketing positions that would be "supportive of the company's long-term strategy to grow and increase the company's presence in key markets."
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