Russia was asked to withdraw from the European aluminum market

As one of the world’s largest aluminum producers with annual exports of more than 3 million tonnes, Russia appears to be losing its main market.

In Europe, where 40% of Russian aluminum went before the war, the contracting season for 2023 is starting, and leading buyers are shunning Russian metal, although it has not been hit by EU sanctions, unlike coal, timber and oil.

One of the largest aluminum consumers, Novelis, a division of India’s Hindalco Industries, has refused to use the Russian metal to supply its European plants. According to Bloomberg, the company held the first procurement tender for deliveries in 2023 and in its terms indicated that it would not accept aluminum of Russian origin.

Novelis tends to set the tone for the market, and other buyers may follow, writes Bloomberg. And this will lead to the need to completely reformat the trade chains in an environment where their own European factories are suffering from rising gas prices and reducing production.

Unlike oil, sending “surplus” aluminum to the East is hardly possible: China itself is the world’s largest producer with volumes 10 times larger than Russia’s (36 million tons per year).

The US discussed sanctions against Russian aluminum in the first week of the invasion of Ukraine, but abandoned the idea, citing it would hit the global market. As a result, Rusal, Russia’s largest producer, lost only 11% of sales in physical terms in the first half of the year, and even won in terms of revenue: it grew by 31%, to $7.1 billion.

However, the company had to look for alternative raw material suppliers after Australia imposed sanctions on alumina supplies to Russia. As a result, Rusal became unprofitable in terms of cash flows: receipts to the company’s accounts turned out to be less than expenses by $1.4 billion.