The possibility that the United States and its allies would impose economic penalties against Russia's aluminium in response to the ongoing geopolitical issue with Ukraine was one of the biggest unpredictability in the global aluminium sector while driving into 2023.
The Russian aluminium industry is vital to the country's defence industrial base. The United States and its allies imposed several economic sanctions on Russia following the geopolitical crisis that started a year back, but none eyed the aluminium sector.
It's crucial to recall the incident of 2018 when the White House imposed sanctions on the Russian aluminium giant, Rusal, in response to Russian aggression, including meddling in United States elections. As an outcome, the US froze most of the company's exports, stunned the aluminium market and propelled the prices.
Aluminium traders worldwide were concerned about 2023 as a result. However, they got some clarity at the end of February 2023, when the White House announced that the United States would impose 200 per cent tariffs on Russian aluminium. The import of Russian aluminium imports from other countries will also be subject to the 200 per cent duty.
On the first anniversary of the Russia-Ukraine geopolitical crisis, a wider package of trade enforcement actions against Russian metals, minerals, and chemicals totalling around $2.8 billion was announced, which included the 200 per cent tariff.
According to a few commodity experts' predictions, the latest measure against Russian aluminium will have an insignificant impact on prices because of a convergence of circumstances, even though tariffs often result in higher prices. Foremost, the tariffs were not as harsh as other measures considered by the White House, such as a total prohibition on Russian aluminium imports and renewed sanctions against Rusal.
The levies are unlikely to cause an aluminium shortage in the United States because consumers' reliance on Russian aluminium has reduced since 2017. Approximately 11% of the aluminium imported by the United States at the time came from Russia, primarily through Rusal. In terms of import volume, its market share decreased to roughly 4 per cent last year.
More significant macroeconomic and demand-side concerns affect aluminium prices than the US tariffs on Russian aluminium imports. Despite continued pressure, the LME metal price has declined about 30 per cent from a year ago.
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