The European Union is contemplating a ban on Russian aluminum imports as part of its 16th package of sanctions, set to be adopted in February 2025. While this potential ban has sparked discussions within the industry, experts suggest that its impact on the aluminum market in Europe may not be as severe as initially expected. With the ongoing decline in imports and Russia’s shrinking market share in Europe, the ban could have broader implications globally, particularly in Asia.
Declining Russian Aluminum Exports to Europe
Russian aluminum exports to Europe have already been on the decline. In 2021, Russia accounted for about 16% of Europe’s total aluminum imports, but for the first nine months of 2024, this share had dropped significantly to just 5%. The overall volume of aluminum imports to Europe has decreased by 4% year-on-year (y-o-y) in 2024, reflecting weakened demand in the region. This shift makes it easier for Europe to replace Russian supplies with alternative sources, particularly from the Middle East.
Despite the drop in Russian aluminum imports, the EU remains a key global market for aluminum, and the ban would likely be part of broader geopolitical actions. However, market sources suggest that Russian suppliers would redirect their exports to other regions, especially Asia, as was done in 2022-23. This could lead to an oversupply in the Asian market, putting additional pressure on aluminum prices in the region.
Russian Aluminum Diversification: A Growing Market in Asia
The reduction in Russian aluminum exports to Europe has been offset by a rise in shipments to China. In 2021, Russian aluminum exports to China were 330,000 tonnes, but this figure surged to 1.2 million tonnes by 2023. For the first nine months of 2024, Russian exports to China stood at 871,000 tonnes. This shift has allowed Russia to diversify its export markets, and the total aluminum export volume from Russia grew by 5% y-o-y in 2024, signaling successful market diversification.
However, this redistribution of supplies may intensify competition in Asia, especially as the Asian market adjusts to an influx of Russian aluminum. This could result in further declining aluminum prices, making the market more volatile.
Production Costs and Market Challenges for Russian Aluminum
While the Russian aluminum market has successfully diversified its exports, there are still significant risks associated with production costs. Rusal, Russia’s largest aluminum producer, announced in late 2024 that it would cut production by 250,000 tonnes, or roughly 6.6% of its total output. This decision was driven by the rising cost of alumina and broader economic constraints.
However, since December 2024, alumina prices have started to decline, which could provide some relief to aluminum producers globally. If this trend continues, it may help stabilize the market and offset some of the production challenges faced by Rusal and other producers in Russia.
Global Implications of a Russian Aluminum Ban
If the EU proceeds with its Russian aluminum ban, the primary impact would likely be on the European market, where Russian aluminum has already been in decline. The larger consequences, however, may be felt globally, particularly in Asia. As Russia reroutes its aluminum exports to China and other Asian markets, this could lead to an oversupply in the region, putting downward pressure on prices and increasing market competition.
Moreover, the global aluminum market could experience volatility due to the changing cost dynamics, especially as production costs in Russia remain a significant factor. While alumina price declines may help alleviate some of these pressures, the geopolitical landscape remains uncertain, and stakeholders will need to closely monitor these developments as they unfold.
