To buy or not to buy: The Russian aluminum dilemma for European buyers

To buy or not to buy: The Russian aluminum dilemma for European buyers

By Joan Foss

BARCELONA (Reuters) – Europe’s electricity crisis, production outages and a shortage of aluminum have left consumers in limbo over Russian supplies of the metal vital to the region’s transport, construction and packaging industries.

Some are choosing to avoid the Rusal mineral, while others are more optimistic – pointing to the fact that neither the company nor its mineral is subject to sanctions imposed on other Russian companies after Moscow’s invasion of Ukraine in February.

Consumers and producers, known in the industry as “mating season,” gathered at a conference in Barcelona this week to agree deals to buy and sell aluminum for next year.

Two sources familiar with the matter told Reuters that organizers refused to accredit the Rusal team to attend the event without giving clear reasons. Someone added that Rusal’s team came to town anyway.

“Some people don’t want aluminum Rusal for moral reasons because of the war in Ukraine,” an aluminum trader in Barcelona told Reuters.

“Others aren’t concerned because Rusal is still sanctions-free, even though they’re milking it and asking for discounts.”

Principal consumer Constellium (NYSE:) is one company that expects to continue to buy Hong Kong-listed Rusal Aluminium.

Among the naysayers of Russian metals for the coming year are one of the world’s largest aluminum consumers, Novelis, a division of Hindalco Industries, and a unit of Norsk Hydro (OTC:) supplying aluminum products to the automotive and construction industries.

A trader told Reuters that some small companies in Europe, including Germany, have decided not to sign up for Rusal Metals for the next year.

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Duncan Hobbs, an analyst at Concord Resources, told Reuters that some medium-sized companies have also decided to stop buying Russian aluminum from next year, without elaborating.

“We have hundreds of customers globally representing one of the strongest and most diverse customer bases in the industry. Our business is not defined by those few who choose to buy aluminum from elsewhere,” a RUSAL representative told Reuters.

For some European consumers facing record-high electricity prices, tight margins and regional shortages, the Rusal Minerals discount is attractive. There is currently a $100-$150 per ton discount on Russian aluminum, a dealer said.

The aluminum production capacity in Europe is about 4.5 million tons. Citi analysts say more than 1.1 million tons of that amount has been idle since 2021 and another 500,000 tons are at risk.

The companies with contracts for this year, agreed in 2021, continued to buy aluminum from Rusal, the world’s largest producer outside China, accounting for 6% of the estimated global supply of 70 million tons this year.

“There is a feeling that Russia wants to sell more aluminum than before,” a European consumer told Reuters in Barcelona, โ€‹โ€‹adding that Rusal, fearing sanctions, might seek cash flow.

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