Aluminum tariffs will have an impact proposed by Russia's

According to media reports, in response to the sharp rise in raw material prices, the Russian government has proposed to impose tariffs on exports of ferrous and non-ferrous metals from August 1, 2021 to December 31, 2021 for countries outside the Eurasian Economic Union to ease domestic inflation. The tariffs will include a basic and specific rate of 15 percent.The specific export duty on aluminum products is $254 per ton.

Russia is the world's second largest producer of electrolytic aluminum after China, the world's largest exporter of primary aluminum and the fourth largest exporter of aluminum alloy.Russia's imposition of tariffs on aluminum exports will have an impact on the global aluminum market. There are 8 home appliances aluminum processing plants in Russia, all belong to Rusal.In 2020, Russia will produce 3.65 million tons of electrolytic aluminum, accounting for 5.6% of the world's total production and 13% of the total production outside China.

It is understood that for aluminum varieties, the scope of the tax is likely to involve primary aluminum, aluminum alloy and aluminum materials.Russia's primary aluminum and aluminum alloy exports more, and aluminum exports less, basically for domestic consumption.In 2019, its exports of primary aluminum and aluminum alloy were 1.9 million tons and 840,000 tons respectively, accounting for 17.4% and 6.9% of the world's total trade volume.The export of primary aluminum accounted for 52% of the total domestic output.

The import of China's primary aluminum and aluminum alloy is mainly affected by the relationship between internal and external aluminum prices, and the import window is intermittently opened.China's primary aluminum imports hit a record high of 1.5 million tons in 2009. It was because the international aluminum prices fell more than domestic aluminum prices under the impact of the financial crisis that the arbitrage import of electrolytic aluminum was stimulated.In the following years, domestic and foreign aluminum prices for most of the time in the pattern of external strength and internal weakness, electrolytic aluminum imports basically maintained at the level of 100,000 tons.In 2020, due to the special reasons of COVID-19, aluminum prices at home and abroad diverged significantly, showing the characteristics of internal strength and external weakness. The ratio price once reached 8.7, a new high since 2009. The import arbitrage window of primary aluminum and aluminum alloy continued to open, and the import volume soared.In 2020, the imports of primary aluminum and aluminum alloy reached 1.064 million tons and 1.233 million tons respectively, both hitting 11-year highs.In 2021, China's electrolytic aluminum production was disturbed by energy consumption double control, power shortage and other factors, leading to the periodic shortage of domestic supply. From January to May, the import volume of primary aluminum and aluminum alloy continued to maintain a high level, reaching 586,000 tons and 395,000 tons respectively.

In terms of import sources, Russia, the United Arab Emirates, India and Malaysia are important sources of primary aluminum for China. In 2020, 363,000 tons of primary aluminum will be imported from Russia, accounting for 34% of the total.From January to May 2021, 147,000 tons will be imported from Russia, accounting for 25%. Aluminum alloy imports mainly come from Malaysia, South Korea, Vietnam and other countries. In 2020, 51,000 tons of aluminum alloy will be imported from Russia, accounting for only 4%.From January to May 2021, the import volume from Russia is 0.76 million tons, accounting for only 1.9%.

It is estimated that since the end of May, China's primary aluminum import window has been basically closed. In June, China's primary aluminum import suffered an average loss of 288 yuan/ton, which means that even if Russia does not add export tariffs, its aluminum ingots will be difficult to export to China.Subsequently, with the resumption of production and production of electrolytic aluminum production, the launch of new projects, as well as the national storage, selling, storage and volume increase, the supply tension will be eased, and the import demand will tend to decline.

On the international front, Japan, the United States and European countries are the main destinations of Russian primary aluminum exports, the decrease of Russian exports is expected to lead to the supply of foreign primary aluminum market tightening, aluminum backwardation is expected to rise.