In response to the sharp increase in raw material prices, Russia will impose export tariffs on ferrous metals and major base metals from August 1 to December 31, 2021. The new tariff system is based on 15%, and the specific export tariff for aluminum products is US$254 per ton. The tariffs are imposed to cool down the domestic metal prices in Russia.
Russia is the world’s second largest producer of primary aluminum (6%) and the world’s largest exporter of aluminum ingots (17%). The imposition of aluminum export tariffs this time has a greater impact on the global primary aluminum supply structure. The author believes that in the short term, due to the closure of China’s domestic aluminum ingot import window, the impact on the domestic aluminum market supply will be limited, but it will have a greater supply tightening impact on overseas supply, which is expected to lift the overseas electrolytic aluminum price center. In the medium term, if the aluminum price is strong on the outside and weak on the inside, it will stimulate the opening of the domestic primary aluminum export window, which in turn will boost domestic demand and drive the domestic price center upward.
Russia’s electrolytic aluminum production mainly comes from Rusal. In 2020, Russia’s electrolytic aluminum production will be 3.65 million tons, accounting for 5.6% of the world’s total output, making it the largest primary aluminum producer outside of China. Russia’s exports of primary aluminum and aluminum alloys are relatively large. In 2019, the exports of primary aluminum and aluminum alloys were 1.9 million tons and 840,000 tons, respectively, accounting for 17.4% and 6.9% of the total global trade volume. Among them, the export volume of primary aluminum accounts for 52% of its total output. The levy of tariffs this time will curb its export of aluminum ingots and increase the shortage of overseas electrolytic aluminum supply.
In the short term, the tight supply and demand of my country’s electrolytic aluminum will ease, and the primary aluminum import window will be closed, leaving limited room for impact. Customs data shows that in the past 10 years, my country’s electrolytic aluminum imports have been relatively small, remaining at the level of 100,000 tons. In 2020, due to the impact of the new crown epidemic, the import volume once increased significantly. The import volume of primary aluminum and aluminum alloy reached 1.064 million tons and 1.233 million tons, respectively, setting new highs in nearly 11 years. Among them, the import of primary aluminum and aluminum alloy from Russia was 36.3 10,000 tons and 51,000 tons, accounting for 34% and 4%. From January to May this year, due to factors such as domestic energy consumption and power shortages, imports of primary aluminum and aluminum alloys continued to maintain a high level, with imports reaching 586,000 tons and 395,000 tons respectively. Among them, primary aluminum and aluminum were imported from Russia. Alloys are 147,000 tons and 7,600 tons respectively, accounting for 25% and 1.9%. According to Antaike data, in June, China’s primary aluminum imports lost an average of 288 yuan/ton, and the export window continued to be closed. Therefore, Russia’s additional tariffs have little impact on the country. With the launch of the project and the dumping of reserves by the State Reserve, the supply tension will be eased, and import demand will tend to decline.
The increase in tariffs imposed by Russia is expected to drive the shortage of overseas primary aluminum supply, which in turn will force Lun Aluminum to strengthen and open up my country’s primary aluminum export window. In addition to China, Japan, the United States and European countries and regions are the main destinations for Russia’s primary aluminum exports. The decrease in Russian exports will result in a tightening of foreign primary aluminum market supply and rising aluminum spot prices, which will eventually force my country’s primary aluminum export window to open , To promote a large number of domestic primary aluminum exports, tighten domestic supply and demand, and drive the global cost of primary aluminum to rise.