10 March 2022 – The European aluminium industry is under severe pressure. High energy costs, sanctions against Russia, imports from China and now increased strategic importance – can it cope? In addition, the SHFE has temporarily suspended trading in some nickel contracts due to the turmoil in the nickel market, after the LME had already suspended trading for nickel.
Europe’s aluminium industry under pressure
The European aluminium industry is under pressure. The sanctions against Russia raise the legitimate question of whether the EU can compensate for the probable decline in aluminium exports from there.
Unwrought aluminium imports to the EU down by 40%
Russia used to be responsible for about 6% of global aluminium exports and was an important trading partner for Europe. But for several years now, for example, the main imports of unwrought aluminium from Russia to the EU have been declining significantly. In total by more than 40%.
New partners and Chinese imports
In contrast, aluminium imports from EU partner countries such as Norway, Iceland and Switzerland have increased significantly in many areas. Imports of aluminium from China have also increased, in some cases by a factor of six, since the anti-dumping measure against flat-rolled aluminium products was suspended by the EC for 9 months in October 2021.
Action before the European Court of Justice
Imports from China in particular are likely to cause headaches for the European aluminium industry. Among other things, it has filed a complaint with the European Court of Justice against the suspension of the anti-dumping measure. This poses enormous risks for European aluminium buyers.
Sharp rise in energy costs
The industry is also struggling with extremely increased energy costs. The increase in costs has already led to several hundred thousand tonnes of smelting capacities in Europe having to be shut down.
Is Russian aluminium now coming to Europe from China?
In addition, there is now also an enormously increased moral component to imports from China, after many aluminium buyers have already stopped cooperating with Russia due to the Ukraine crisis. Russia is therefore very likely to redirect its freed-up aluminium capacities to China, which has already been a net importer of aluminium products for some time. It is therefore very likely that Russian aluminium will again enter the EU market, albeit via the Chinese diversions.
Strategic importance of the aluminium industry
With the possible start of a new cold war between West and East and the announcement of many NATO member states to drastically increase their defence spending, the aluminium industry will again have a greater strategic importance in the future – especially in aircraft construction – in addition to the steel, cement and energy industries.
EU focuses on its strategic industries
Therefore, the EU member states and the European Commission will continue to protect, if not jealously guard, their strategic industries.
This is not an easy time for European aluminium producers, but also for the downstream industry, which depends on a reliable and calculable supply of raw materials. New ideas and partners are needed to be able to react to the situation appropriately and sustainably.
SHFE temporarily suspends nickel trading
SHFE has temporarily suspended some nickel contracts with large trading volumes due to the distortions in the global nickel trade. This is to counteract the very high volatility in prices. On the SHFE, too, nickel contracts had hit the daily price limit several times in the last few days. Here, too, the influence of the Chinese trader Big Shot and the struggle between short and long positions for the nickel price are assumed to be the background.
The LME has already had to suspend trading in the commodity due to a rise in nickel to over $100,000 per tonne and is currently working to restore order to the situation.
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