Impacts of US Plan to Raise Tariffs on Russian Aluminium Products

SHANGHAI, Feb 7 (SMM) - Last night, the news came that the United States planned to impose 200% tariffs on Russian aluminium products, which boosted LME aluminium by 2% during night session.

Today, LME aluminium rose further by 0.18% to $2,548.5/mt as of CST 11:55.

It is reported that US has been mulling over the tariffs for a couple of months, not only on account of the Russia-Ukraine conflict, but also to prevent Russia's dumping aluminium from hurting the profits of US companies.

It is known that Russia is the second largest producer of aluminium in the world. The annual aluminium capacity of Rusal, a prominent Russian aluminium company, stands at approximately 4.5 million mt, accounting for roughly 6% of the global total and 13% of the capacity outside China. Rusal produced 3.6 million mt of aluminium in 2021.

It should be noted that Rusal is also the largest supplier of aluminium for Europe by contributing to 40% of the aluminium supplies in Europe. On the contrary, the supplies from Rusal to the US only accounts for 10% of the US total aluminium imports.

There were rumours about US considering imposing sanctions on Russia's aluminium metal as early as October 2022. At that time, the US traders basically imported no aluminium from Russia. The imports in the following two months recovered as no specific sanctions were adopted. The data show that as of November 2022, the US imported 183,000 mt of aluminium products from Russia, among which there was 177,000 mt of aluminium metal, accounting form 4.71% of the total aluminium metal imports. This year, the US aluminium imports from Russia were lowered to 9,700 mt.

The new rumours of potential tariffs suggests that the US might stop purchasing aluminium from Russia. But it is should be pointed out that the US government has not yet officially approved the tariffs, fearing that this move will cause damage to American industries including aerospace and automotive.

With regards to the tariffs, SMM believes that if the United States finally decides to impose sanctions on Russian aluminium products, there will be two outcomes. 

First, the Russian aluminium products that are supposed to flow to the US will switch to the Asian market if the sanctions are nailed. 

China has ramped up the imports of primary aluminium from Russia since the second half year of 2022. According to customs data, 88,900 mt of primary aluminium were imported from Russia to China in December 2022, up 47.59% on month and 807.31% on the year. Therefore, if the sanctions are implemented, the large inflows of Russian aluminium products to domestic market will subdue domestic aluminium prices.

Second, Russia is a major aluminium supplier in the world and it will be hard to avoid using its products. Therefore, the United States may resort to purchasing Russian aluminium products from other countries to meet its own demand.

Generally speaking, the US sanctions on Russian aluminium metal has not taken effect, so SMM believes that the tariffs will not have a major impact for the time being.