The EU may impose sanctions on Russian aluminum, making Middle Eastern aluminum a "hot commodity" for European and American buyers.

If the EU bans the import of Russian aluminum in the coming months, buyers in Europe and the US will fiercely compete for aluminum from the Middle East, leading to a rise in prices. According to reports, the EU has been discussing sanctions on importing aluminum from Russia for several months. Sources said that the latest sanctions plan launched by the EU in light of the 2nd anniversary of the Russia-Ukraine conflict does not include new sanctions against aluminum, but it is expected that the EU will soon propose another new import ban plan. Competition among European and American buyers for aluminum from Middle Eastern countries such as the UAE and Bahrain will exacerbate inflation in the transportation, packaging, and construction industries, which are already facing high costs of raw materials and wages. Aluminum is a key material for manufacturing electric vehicles. It is much lighter than steel and is currently the preferred metal for many electric vehicle components. According to data from the International Aluminum Institute, Middle Eastern producers supplied 6.2 million tons last year, accounting for nearly 9% of global supply. Around 2 million tons of this was shipped to Europe and the US. Banning Russian metal will create a gap of around 500,000 tons in Europe, some of which can be offset by restarting idle capacity in the region. "Middle Eastern suppliers will not be able to quickly fully compensate for Europe's shortage," said Dmitri Ceres of US aluminum trader PerenniAL. Aluminum buyers in the spot market will have to pay the price on the London Metal Exchange (LME), plus a premium to cover transportation, processing costs, and taxes. Ceres said, "The premium in Europe will have to increase in order to attract metal from other regions, including the US. The premium in the US will also have to rise in order to maintain metal supply." Keeping an eye on LME's response If new sanctions are imposed, aluminum prices are unlikely to rise to the levels of 2018, when RUSAL was sanctioned by the US. However, the market's reaction will depend on whether LME decides to ban Russian aluminum due to EU sanctions, as Russian aluminum accounts for 90% of the total stock in LME registered warehouses. "If LME no longer accepts Russian aluminum for trading, given the lack of non-Russian metal in the warehouses, spot premiums and LME prices are likely to soar significantly," said US bank analyst Michael Widmer. Self-sanctioning and imposing a 200% tariff on Russian aluminum and aluminum products means that many US companies have already turned to other countries, including the Middle East. Data from Trade Data Monitor (TDM) shows that last year, aluminum imports from Russia to the US fell to 16,902 tons, accounting for 0.4% of the total, compared to 4% in 2022 and nearly 9% in 2018. In contrast, aluminum imports from Russia to the EU have decreased, but the amount is still significant. According to TDM data, in 2023, the EU imported 512,122 tons of aluminum from Russia, accounting for 8% of the total, compared to 12% in 2022 and 19% in 2018. Analyst David Wilson of BNP Paribas in France said, "EU sanctions on Russian aluminum will lead to an increase in premiums in Europe. The US premium will also have to increase to remain competitive." "The premium in Europe has already risen, and the cost of transporting this metal from the Middle East and other Asian countries has also increased due to the recent Red Sea attacks." Last year, the EU imported nearly 1.2 million tons of aluminum from the Middle East, accounting for 18.8% of the total, while the US imported over 800,000 tons, accounting for 19.3% of the total.