Nichole Bastin | Posted on March 4, 2022 |
The Aluminum Monthly Metals Index (MMI) climbed by 8.0%, as aluminum prices spiked on the heels of Russia’s invasion of Ukraine. Source: MetalMiner Insights Aluminum prices spiked as tensions escalated between Russia and Ukraine. However, aluminum prices then began a slight decline before the launch of Russia’s full-scale invasion. MetalMiner publishes a wide range of aluminum price points searchable by location, form, unit and currency. Source: MetalMiner Insights The invasion became the catalyst for the continuation of the uptrend that pushed prices to new historical highs, an indicator of no slowdown yet for the bulls.
Sanctions have yet to single out the sector. However, the Russia-Ukraine crisis continues to hammer the aluminum market. Citing logistical challenges around the Black Sea in an announcement made March 1, major Russian aluminum producer Rusal shuttered production at the Nikolaev alumina refinery in Ukraine. The refinery produces 1.75 million tons per annum (Mtpa), ships alumina to the Russian smelters Bratsk, Krasnoyarsk and Sayanogorsk. Furthermore, in total, the three smelters produce roughly 2.5 million tons of aluminum annually. Meanwhile, Nikolaev accounts for around 23% of Rusal’s primary aluminum production, mining.com reported. The impact of Nikolaev’s closure will likely depend upon the length of the ongoing conflict. The smelter’s alumina inventories will likely extend anywhere from a few weeks to a month. Rusal is Russia’s largest aluminum producer. Rusal’s output accounts for roughly 6% of the estimated 70 million tons per year of global supply. The company remains vulnerable to surging energy prices and supply and logistics disruptions due to the ongoing crisis. However, the already tight global aluminum market has likely insulated Rusal from any targeted sanctions thus far (as happened in 2018). According to the World Bureau of Metal Statistics, 2021 saw a deficit of 1.9-million tons. As such, in tight aluminum supply markets, buyers should carefully review their sourcing strategies. Nonetheless, shares of the company continue to plummet. Shares fell 26% drop on March 2 following a staunch condemnation of Russia from Glencore. The world’s largest commodity trader indicated it would review “all our business activities in the country.” Maersk, MSC and CMA CGN, the three largest shipping lines, announced March 2 the suspension of non-essential deliveries to and from Russia.
Meanwhile, the leading U.S. aluminum producer, Alcoa, announced March 2 it would halt product sales to and raw-material purchases from Russia. The decision comes as a growing number of companies seek to condemn the Russian invasion and squeeze its economy as a result. “In response to the current aggression, Alcoa will cease buying raw materials from, or selling our products to, Russian business,” Alcoa CEO Roy Harvey said in a letter to employees. Alcoa’s decision follows its recent reaffirmation on March 1 to not add or build any new aluminum smelters in spite of increasingly tight global supply, Bloomberg reported. Harvey first made this commitment in November. The company seeks to eliminate carbon dioxide emissions through technology developed from its joint venture with Rio Tinto, dubbed Elysis. The company will construct exclusively low-emission mills as opposed to traditional aluminum making. Furthermore, Alcoa expects the product to reach commercial-scale production within a few years. As buyers keep tabs on metals markets, they should make sure to be strategic in their negotiations with mills and service centers.
In late February, Novelis announced plans to build an aluminum recycling facility in South Korea. Construction will begin for the Ulsan Recycling facility in October. Novelis aims to complete construction by early 2024. The facility will boast an annual casting capacity of 100,000 tons of low-carbon sheet ingot. Novelis’ announcement follows the commissioning of a new melting furnace at Austria’s Hammerer Aluminum Industries Santana, Romania plant. The addition will advance the plant’s annual recycling and remelting capacity by around 250,000 tons.
The LME three-month aluminum price jumped by 11.73% month over month to $3,447 per metric ton as of March 1. Chinese primary cash aluminum rose by 0.87% to $3,573 per metric ton. Meanwhile, Chinese aluminum scrap increased by 3.13% to $2,591 per metric ton. Chinese aluminum billet rose by 2.91% to $3,599 per metric ton. Meanwhile, European 1050 aluminum sheet increased by 7.37% to $5,188 per metric ton. Lastly, Indian primary cash rose by 8.71% to $3.62 per kilogram.
Filed under: Metal Prices, Non-ferrous Metals
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