Barcelona industry players meet splits dealmakers over Russian aluminium

The producers and consumers in the metals industry are convening this week to negotiate supply agreements for the upcoming year, with Russian aluminium causing division within the sector. While certain industrial consumers have opted not to consume supplies from Russia due to the Ukraine-Russia geopolitical issue, opposing arguments suggest that such a stance is unjustifiable when sanctions do not encompass a company or its metal products.

Discussions regarding the prohibition of Russian metal are expected to resurface in Barcelona this week. In July, the Norwegian aluminium giant called upon the London Metal Exchange (LME) to reconsider its stance on not imposing a ban on Russian aluminium.

The International Aluminium Conference, which commenced on August 12, is considered a period when businesses actively pursue supply agreements.

Duncan Hobbs, the Research Director at Concord Resources, said, “Self-sanctioning has increased from last year. Some aluminium consumers request quotations for contracted supplies in 2024, specifically excluding Russian metals."

Nevertheless, the leading Russian aluminium producer, responsible for 6 per cent of the worldwide supply, asserts that numerous consumers in Asia and Europe continue to procure its products. The Russian aluminium giant reported increased sales in Asia last month, emphasizing that Europe remains a pivotal market, contributing to more than 30 per cent of the revenue in H1 2023. However, five European industry associations have requested the LME to disregard appeals for a prohibition.

Russian-origin aluminium stocks in LME-approved warehouses available for market use have experienced a notable increase this year, from 41 per cent in January to 81 per cent in August.

This surge in availability can be attributed to the reluctance of some consumers to use Russian metal, which has led to more of this material flowing into the Chinese market. In the first seven months of this year, the proportion of Russian metal among total unwrought aluminium imports to China has risen significantly, reaching 46 per cent, compared to the 27 per cent recorded for 2022.

Participants in the industry gathering in Barcelona are also keenly interested in any indications regarding the demand outlook. This interest arises from concerns about sluggish global economic growth and consistent aluminium production in China, which have been exerting downward pressure on prices. The benchmark price of this lightweight metal, essential in industries such as transport, construction, and packaging, has already declined by 8 per cent this year. This drop is largely attributed to worries about China's subdued economic growth and interest rate increases in other parts of the world.