Mysteel believes the Russia-Ukraine situation will provide strong support to aluminium prices in terms of costs and supplies. With the deterioration of the situation between Russia and Ukraine, the possibility of rusal being sanctioned again increases, and the overseas market is increasingly worried about the contraction of aluminum supply. Back in 2018, after the US announced sanctions against Rusal, Aluminum surged more than 30% in 11 trading days to a seven-year high. The incident also disrupted the global aluminum supply chain, which eventually spread to downstream manufacturing industries, mainly in the United States. As costs soared, enterprises were overwhelmed, and the U.S. government had to lift sanctions against Rusal.
In addition, from the cost side, affected by the situation in Russia and Ukraine, European gas prices soared. The Crisis in Ukraine has raised the stakes for Europe’s energy supplies, which are already Mired in an energy crisis. Since the second half of 2021, the European energy crisis has led to a surge in energy prices and the expansion of production cuts at European aluminum mills. Entering 2022, the European energy crisis is still fermenting, power costs remain high, and the possibility of further expansion of European aluminum companies’ production cuts increases. According to Mysteel, Europe has lost more than 800,000 tonnes of aluminium per year due to high electricity costs.
From the perspective of the impact on the supply and demand side of the Chinese market, if Rusal is again subject to sanctions, supported by supply side interference, it is expected that LME aluminum prices still have room to surge, and the internal and external price difference will continue to expand. According to the statistics of Mysteel, by the end of February, China’s electrolytic aluminum import loss has been as high as 3500 yuan/ton, it is expected that the import window of The Chinese market will continue to be closed in the short term, and the import volume of primary aluminum will significantly decrease year-on-year. In terms of exports, in 2018, after Rusal was imposed sanctions, the supply rhythm of the global aluminum market was disrupted, which raised the premium of overseas aluminum, thus driving the enthusiasm of domestic exports. If the sanctions are repeated this time, the overseas market is in the post-epidemic demand recovery stage, and it is expected that China’s export orders of aluminum products are expected to significantly increase.
Post time: Mar-01-2022