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The future for European aluminum is “at risk,” as escalating electricity costs have made the region’s production uncompetitive against Russian imports, according to Norsk Hydro. The company, therefore, encourages the EU and US to implement sanctions against Russia’s top aluminum producer, Rusal. Norsk also believes that Russia is “benefiting” from the recent smelter curtailments occurring across Europe, as Russian aluminum production continues at pre-war levels. Since the start of the Russia-Ukraine conflict, Russia has largely cut off natural gas flows to Europe, leading to soaring electricity prices across the region, and forcing many European aluminum smelters to curtail production fully or partially. AEGIS estimates that nearly 26% or 1.16 million mt, of Europe’s annual aluminum smelter capacity has been curtailed as high electricity costs have production unprofitable. |
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Sanctions, if implemented, could be supportive of global aluminum prices. This is mainly because the US and Europe are large buyers of Russian aluminum, and importers will need to seek out new suppliers if Russian metals are blocked from the market. Aluminum end-users that are concerned about increasing prices could consider buying swaps or call options. Such positions are standard for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (10/26/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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AEGIS Insights |
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10/19/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 10/05/2022: European Aluminum Smelters Might Have Negative Margins Through 2023 8/31/2022: Will Chilean Production Issues Drive Copper Prices Higher? 8/24/2022: Chinese Aluminum Supply Issues Could Rally Prices |
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| Important Headlines | ||
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10/25/2022: Norsk Hydro calls for EU, US sanctions on Russian aluminium 10/24/2022: China Sept aluminium output rises 9.3% y/y as power restrictions ease 10/24/2022: LME Week: Al market braces for the unknown 10/21/2022: Alcoa reduces 2022 alumina, bauxite outlook |
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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