Russia Finds New Alumina Supply

China normally exports little alumina to Russia, as they only shipped 1,747 mt to them in 2021. However, logistical issues and sanctions from the Russia-Ukraine conflict have forced Rusal to seek out Chinese alumina. These alumina imports have helped Russia’s aluminum producer, Rusal, to keep aluminum production flowing.

China's total monthly alumina shipments rarely eclipse 10,000 mt. However, exports have increased dramatically in 2022. This increase in shipments coincides with the start of the Russia-Ukraine conflict, as nearly all of the recent shipments are going to Russia.  

Aluminum prices at the LME are down nearly 13.6% in 2022 (8:00 AM CST 8/2/2022). End-users might consider using the recent dip in prices by applying simple hedges involving swaps and call options. One other possible strategy is a costless collar. In this case, a “zero-cost collar” creates a maximum and minimum aluminum price for an end user, as they would simultaneously buy a call option (creating a cap, or maximum) and sell a put option (creating a floor, or minimum). The call and put premiums offset, making the construction costless. It is popular because of the upside price protection, but you sacrifice access to much lower prices if prices should fall. Such positions are standard for consumer hedging, but they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations.