European and American buyers are competing aggressively for aluminum in the Middle East, with the European Union banning the Russian metal in the coming months, sparking price hikes similar to 2018 when sanctions were imposed on Rusal.
Reuters said that the race for aluminum from Middle Eastern countries, including the United Arab Emirates and Bahrain, would fuel inflation for Western companies in the transportation, packaging and construction sectors, which are already facing rising costs of raw materials and salaries.
Aluminum is the main component of electric cars. It is much lighter than steel, and is now the metal of choice in a wide range of electric vehicle parts.
For months, the European Union has discussed imposing sanctions that would ban Russian aluminum.
Sources said that the European Union did not issue any new sanctions on aluminum in the latest package marking the second anniversary of the Russian invasion of Ukraine, but the Union is expected to soon propose another package that includes a new ban on imports.
Middle Eastern producers were responsible for 6.2 million metric tons, or nearly 9% of global supplies last year, according to the International Aluminum Institute. Nearly two million of them were shipped to Europe and the United States.
The loss of the Russian metal would leave Europe with a deficit of about 500,000 tons, some of which could be compensated for by restarting idle power in the region. But not all.
“Suppliers in the Middle East will not be able to quickly make up for the entire shortage in Europe,” said Dimitri Seres of US-based aluminum trader Perennial.
“European premiums must rise to attract metals away from other regions including the United States,” Serres said. US premiums must also rise to maintain access to the metal.”
US sanctions on the Russian company Rusal in April 2018 sparked a crisis that led aluminum on the London Metal Exchange to jump 35% in a few days to its highest levels in seven years.
Figures from the Trade Data Monitor (TDM) showed that US imports of Russian aluminum fell to 16,902 tons last year, or 0.4% of the total, from 4% in 2022 and about 9% in 2018.
European Union aluminum imports from the Middle East amounted to nearly 1.2 million tons, or 18.8% of last year’s total, while the United States imported more than 800,000 tons, or 19.3%.
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