Aluminium buyers getting discounts from Rusal

Clients of Russian aluminium producer Rusal are getting price discounts when buying the group’s metal on fear of sanctions weakening demand, say a European trader and a Gulf-based producer.

Western sanctions against Moscow because of its Ukraine invasion have so far not directly targeted Hong-Kong listed Rusal, the world’s largest aluminium producer outside China, and Russian aluminium.

But the EU, US and Britain have expanded the scope of the measures several times to date, often with little notice.

“There is currently a $100-$150 per tonne discount” for Russian aluminium, the European trader told Reuters on the sidelines of an aluminium conference in Barcelona on Wednesday.

Rusal’s pricing is related to market conditions and overall terms of any deal, but it is not driven by origin, the company told Reuters. “Our customers continue to purchase our goods on standard market terms, recognising the role our metal plays in the regional balance,” it said.

Aluminium prices on the London Metal Exchange are down 20% so far this year to $2,260 per tonne.

Some buyers decided to exclude Russian aluminium and are looking elsewhere. Novelis, one of the world’s largest aluminium buyers, will not accept Russian metal at its European factories in 2023. A division of Norsk Hydro will exclude Russian metal from deals to buy aluminium for 2023.

“Parties mentioned in recent articles are not customers of Rusal,” said Rusal.

Some small and medium size companies have also decided to stop buying Russian aluminium from 2023, said Concord Resources analyst Duncan Hobbs, without elaborating.

But the trader said that many others are still buying the metal from Rusal, although they preferred aluminium produced by the company’s Europe-based plants given the risks sanctions posed for shipping from Russia.

The metal is used in the transport, packaging and construction industries. 

EU imports of Russian aluminium rose 13% in March-June as European producers battled with soaring energy costs. Rusal benefits from relatively cheap hydropower.

The $100-$150 a tonne discount for Russian aluminium started to appear about a month ago, said Mohamed Mustafa Rafea, CEO at Garmco, a producer of aluminium coils and sheets in Bahrain.

The aluminium industry has started its “mating season”, with  consumers and producers of aluminium typically striking deals for the next year.

Gulf producers have a chance to boost supplies to Europe as Garmco also benefits from cheaper energy, Rafea said. His company has already found new buyers and increased exports to Europe by 20%%-30% since February.

Europe’s energy crisis is supporting demand for imported recycled product from the Gulf region. PGI, which recycles scrap metal in the United Arab Emirates, says the European share of its sales rose to 12% from 7% this year.

Reuters