Five business associations representing aluminum consumers in the European Union have called on the London Metal Exchange (LME) to reject demands for sanctions on Russian primary metal, citing them as “obvious market manipulations.” The Federation of Aluminium Consumers in Europe (FACE) released a statement on Friday expressing their concerns.
Norwegian producer Norsk Hydro had recently urged the LME, the largest and oldest market for industrial metals worldwide, to reconsider its decision made in March not to ban Russian aluminum from its warehouse network. Norsk Hydro argued that the dominance of Russian aluminum, which is subject to US sanctions, in LME’s warehouse stock poses risks to the market.
In response to these calls for sanctions, FACE, along with four associations from Germany and Italy, wrote a letter to the LME on Friday. They claimed that banning Russian aluminum would be an obvious attempt by major metal producers, who are direct competitors of Russian manufacturer Rusal, to manipulate the market. They argued that such a ban would be detrimental to the European aluminum industry, given the current context of a huge metal deficit, high energy prices, and inflation.
Mario Conserva, FACE’s secretary general, stated that calls for sanctions seem like yet another oligopolistic attempt to eliminate a competitor using non-market practices. He criticized the exclusion of the interests of small and medium-sized businesses, which represent the majority of the EU aluminum industry’s workforce and output, from trade and supply policy decisions.
The statement highlighted that a ban on Russian metal supplies would have a devastating impact on the EU aluminum industry value-chain and turn Europe into a captive market. Conserva emphasized that the EU is heavily reliant on other countries for almost 90% of its primary aluminum needs, and Rusal accounts for approximately 12% of the bloc’s current demand. FACE argued that Rusal’s output is competitive, fairly priced, and contributes to reducing the carbon footprint of the entire European aluminum industry.
These concerns echo the warnings issued by EU industry group European Aluminium earlier this month, cautioning against imposing sanctions on Rusal due to its strategic importance in the global aluminum market.
The Russian aluminum industry has increasingly faced restrictions from Western countries. In February, the US imposed 200% duties on imports of Russian-made aluminum products, followed by Canada’s ban on imports of Russian aluminum and steel in March. In May, the UK also revealed plans to ban imports of Russian aluminum. So far, the EU has only restricted imports of specific aluminum products from Russia.
It remains to be seen how the LME will respond to these demands from aluminum consumers. As the largest market for industrial metals, its decision can have significant impacts on the global aluminum industry. The concerns raised by FACE highlight the complex dynamics and competition within the aluminum market, as well as the potential consequences of imposing sanctions on Russian aluminum.