In a recent announcement, Russia’s Rusal, the leading aluminium producer globally outside China, confirmed that they’ve allocated their entire sales volumes for 2023. The company’s production and sales dynamics are under heightened scrutiny during the annual LME week in London.
LME Week Highlights
LME Week, a prominent annual gathering, coincides with the season when major stakeholders in the aluminium sector, including producers, traders, and consumers, finalize deals for the upcoming year. Given this setting, Rusal’s sales portfolio for 2024 is under active development after successfully filling their 2023 slots. Notably, Rusal contributes approximately 3.8 million metric tons to the global aluminium production each year.
The Impact of Political Tensions
Western sanctions, although not directly targeting Rusal or Russian aluminium, have indirectly influenced certain Western consumers to refrain from initiating new deals involving Russian-produced metal. This cautious approach emerged after Russia’s full-scale invasion of Ukraine in 2022. Despite this hesitation, many of these Western consumers uphold prior contracts, leading to the procurement of the Russian aluminium.
Stock Dynamics and Market Distribution
This situation has led to a surge in the proportion of Russian aluminium in the stocks of the London Metals Exchange-registered warehouses, which stood at 81% by the end of August. This rise has evoked concerns among Rusal’s Western competitors.
In a related development, Norsk Hydro, a significant aluminium producer, urged the LME in July to reevaluate its decision to include Russian aluminium in its warehouse network.
Rusal’s Market Spread
Despite the overarching geopolitical and market dynamics, Rusal’s H1 financial results indicated sustained sales in the European market, even though the region has shown a lukewarm demand this year. Breaking down their H1 revenues, which amounted to $5.9 billion, sales to Asia and Europe comprised 33% and 31% respectively.