To buy or not to buy: Russian aluminium dilemma for Europe's buyers

Constellium SE

16/09/2022 08:00

(Repeats SEPT. 15 story. No change to text.)
    By Joan Faus
    BARCELONA, Sept 16 (Reuters) - Europe's power crisis,
production cuts and shortages of aluminium have left consumers
in a quandary about Russian supplies of the metal vital for the
region's transport, construction and packaging industries.
    Some are choosing to shun Rusal's  0486.HK  metal, while
others are more sanguine - pointing to the fact that neither the
company nor its metal is under sanctions imposed on other
Russian companies after Moscow's invasion of Ukraine in
February.
    Known in the industry as "the mating season", consumers and
producers gathered at a conference in Barcelona this week to
agree deals to buy and sell aluminium for next year.
    Organisers declined to accredit Rusal's team for the event,
without giving a clear reason, two sources familiar with the
matter told Reuters. Rusal's team came to the city anyway, one
of them added. 
    "Some people don't want Rusal's aluminium on moral grounds,
because of the war in Ukraine," an aluminium trader in Barcelona
told Reuters. 
    "Others are not worried because Rusal is still sanction
free, though they are milking it, asking for discounts."
    Major consumer Constellium  3OK.F  is one company that
expects to keep buying Hong Kong-listed Rusal's aluminium.
 urn:newsml:reuters.com:*:nL8N30M2U7
    Among those rejecting Russian metal for next year are one of
the world's largest aluminium consumer, Novelis, a division of
Hindalco Industries  HALC.NS , and a unit of Norsk Hydro
 NHY.OL  supplying aluminium products to the auto and
construction industries.  urn:newsml:reuters.com:*:nL8N30D2QV  urn:newsml:reuters.com:*:nL8N3091TF
    Some small companies in Europe, including Germany, decided
not to sign up for Rusal's metal for next year, a trader told
Reuters.
    Some medium size companies have also decided to stop buying
Russian aluminium from next year, Duncan Hobbs, an analyst for
Concord Resources, told Reuters, without elaborating.
 urn:newsml:reuters.com:*:nL1N30L1M7
    "We have hundreds of clients globally, representing one of
the strongest and most diverse customer bases in the industry.
Our business is not defined by those few who choose to buy their
aluminium elsewhere," a Rusal representative told Reuters.
    For some European consumers facing record high electricity
prices, squeezed margins and regional shortages, a discount for
Rusal's metal is attractive. There is currently a $100-$150 per
tonne discount for Russian aluminium, a trader said.
 urn:newsml:reuters.com:*:nL1N30L1M7
    Europe's aluminium output capacity is about 4.5 million
tonnes. Of that, more than 1.1 million tonnes has been taken
offline since 2021 and another 500,000 tonnes is under threat,
Citi analysts say.  urn:newsml:reuters.com:*:nL1N3060XD
    Companies with contracts for this year, agreed in 2021, have
continued to buy aluminium from Rusal, the world's largest
producer outside China, accounting for 6% of global supplies
estimated at around 70 million tonnes this year.
    "There is feeling that Russia wants to sell more aluminium
than before," a European consumer told Reuters in Barcelona,
adding that Rusal, fearing sanctions, could be seeking cash
flow.

 (Writing by Pratima Desai
Editing by Mark Potter)
 ((pratima.desai@thomsonreuters.com; +44 207 513 5681;))