US protective duties on Russian aluminum: economists assessed the consequences

Domestic metallurgists are reorienting to the Asian market

The United States prepared a new blow to foreign exchange earnings from Russian exports. After gas and oil, according to Bloomberg, aluminum came under distribution, for which Washington is going to set protective duties of 200%, which will completely stop the supply of Russian metal to the United States. Alternative exports could be increased to India and China, which will likely require significant discounts for increased purchases of high-value goods.

Joe Biden has not yet given consent to the introduction of protective duties on Russian aluminum – the US administration fears that such sanctions will cause serious damage to the aerospace and automotive industries of the United States. Nevertheless, the issue is being worked out with might and main in the White House administration.

At the same time, it cannot be said that the American market was the key one for Russian producers of the precious metal. The report for the first half of 2022 notes that America’s share of the top domestic aluminum suppliers’ revenues fell from 9% to 7%. Nevertheless, their revenues still amounted to a tidy sum of $500 million. At the same time, 40%, 29% and 23% of finished products went to the markets of Europe, the CIS and Asia, respectively. In particular, our country supplied aluminum to China in the amount of $1.3 billion in 2022, almost doubling exports. In turn, Russian metallurgists usually sent about 10-11 million tons of “winged metal” to India annually, but the cost of these deliveries barely exceeded $30 million.

“Unlike the energy market, the global metallurgy market is a more technologically complex mechanism,” says Igor Nikolaev, Doctor of Economics, Chief Researcher at the Institute of Economics of the Russian Academy of Sciences.

If momentary quotes per barrel and thousands of cubic meters rule the ball on raw fuel sites, then metal can wait. According to Chinese government agencies, from 2019 to 2022, there was a steady increase in the cost of aluminum: its price increased by almost 35% and exceeded 22,000 yuan per ton.

However, Russia is by no means the leader in aluminum exports to the Celestial Empire – our companies supply this country with only 290,000 tons of flying metal. The main supplier of aluminum to the Chinese industry is India: however, the Indians do not supply the Chinese with blanks from which parts for cars or complex equipment can be made, but stairs, kitchen appliances or elementary foil.

“Nevertheless, the cost of these deliveries is estimated at tens or even hundreds of billions of dollars. After the introduction of protective duties by the US government, Russian aluminum will go to the Indian market in large volumes. Delhi, of course, will require serious discounts for increasing imports of expensive metal, and then it will resell finished products to other Asian buyers, ”the expert argues.

Moscow will have no problems with aluminum supplies, Sergey Severov, an investment strategist at Arikapital Management Company, is sure. After all, this year the international aluminum market is expected to have a shortage of metal at the level of 1.5 million tons. Although a year ago there was an excess of aluminum in the automotive, shipbuilding and other world production markets – the surplus was at least 1.4 million tons.

“Of course, export duties imposed by Washington will protect Russian producers from the American market, but will not stop deliveries to the South Asian regions,” Severov said. – Under the sanctions, Russian oil companies had to sell raw materials to Asia at a 30% discount. Most likely, similar discounts will have to be offered for metal.” In this regard, the expert believes, Russia should strive to supply the foreign market not with primary blanks, that is, blanks that can be processed at any “shabby” Asian plant, but with high-tech parts. “The growth of our revenues from the export of finished parts can grow by an order of magnitude,” says the interlocutor of MK.