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Good luck with making that work.
It would require knowing the provenance of not just Russian primary aluminium but also any Russian material present in the wire, foil, profiles and secondary products being brought into the US. But even that would not include the bauxite and alumina that went into making them.
While the world is moving toward the eventual use of some kind of digital tracking system that incorporates the origins of materials from mine to melt shop, it certainly has not gotten to that point yet.
To a certain extent, the proposed tariffs are little more than a financial deterrent to the already relatively insignificant amount of metal that enters the US from Russia.
That was highlighted when the London Metal Exchange suspended the warranting of aluminium in US warehouses, part of a broader prohibition on other metals including copper, nickel and lead.
Spoiler alert: there is no Russian metal in the US system besides 400 tonnes of North American aluminium alloy (NASAAC), which is now suspended and stuck in limbo. Given that the NASAAC contract has no open interest, no effect on the market is expected.
It is unclear why the US did not go down the route of sanctions, as it did in 2018, and as it has done with oil.
That is something for which major US aluminium producer Alcoa has been lobbying.
The US used to be a sizeable producer of aluminium, but output has steadily declined over recent years due to a combination of factors including energy costs.
In 2022, the US imported 6.3 million tonnes of aluminium products from 91 countries, according to data from the US Department of Commerce, Employment & Compliance. The bulk of that material came from Canada, at 3.011 million tonnes.
That is hardly a surprise: Canada supplies about 45% of US primary aluminium needs, with about 70% of that country’s aluminium production destined for its southern neighbor. The biggest supplier is Rio Tinto, the largest producer of primary aluminium in North America, with about 75% of its material supplying more than 35 US states.
After Canada, the next biggest import source for the US in 2022 was the United Arab Emirates, with 468,138 tonnes, followed by Bahrain with 325,910 tonnes and China with 292,487 tonnes.
The data revealed that Russia, with imports totalling 208,755 tonnes, ranked in fifth place, and accounted for just over 3% of total US imports of aluminium products in 2022. Around 88% of Russian aluminium products imported into the US last year were in unwrought form, meaning they had not been machined or processed. The rest entered in the categories of wire; plates, strip and sheets; and bars, rods and profiles.
This is not exactly a great amount, then, and included a trivial 360 tonnes in September and only 152 tonnes in October, with imports of Russian metal dwindling through the year following the country’s invasion of Ukraine.
The decline is a trend that was already underway.
Russian aluminium products started to be diverted from the US in April 2018, when the US imposed sanctions against UC Rusal and its then-owner, billionaire oligarch Oleg Deripaska.
Deripaska officially resigned as director of Rusal in May 2018, and the US sanctions against Rusal were removed in 2019.
Having been close to 800,000 tonnes in 2017, Russia-origin aluminium imports into the US almost halved during the sanctions of 2018, and continued to fall, dropping to 267,848 tonnes in 2019 and 183,266 tonnes in 2020, US data showed. In 2021, Russian imports amounted to 242,479 tonnes.
Since the Ukraine invasion, metal has instead been flowing from Russia to end-customers in China and Southeast Asia, market participants say. Warehouse companies say they have not had Russian aluminium in their US sheds for many months, even years, while physical traders told Fastmarkets that they had not seen A7e-grade ingot in the market and that value-added products and slab imports were now scarce.
The physical market seems to be unfazed, however, supporting the idea that Russian aluminium imports into the US do not amount to enough to have an effect.
Fastmarkets’ assessment of the aluminium P1020A premium, ddp Midwest US, rose slightly after initial talk about a tariff emerged at the start of this month, reaching 27.75-32.00 cents per lb on February 7, from 27.00-30.00 cents per lb on February 3. The market then narrowed to 27.75-30.00 cents per lb in the following assessment on February 10, and the premium was most recently assessed at 28.50-30.50 cents per lb on February 24.
There is also a question of whether Russian aluminium, or products containing such material, might start to enter the US by a slightly more circuitous route.
The aluminium industry has a history of semi-fabricated aluminium products being allegedly sold for remelt in order to circumvent tariffs.
In 2014, an elaborate fake-semis scheme was discovered in which Chinese material evaded duties by being shipped to Mexico and entering the US from there instead.
When the Mexican situation came to light, the material started going to Vietnam for fabrication instead, market participants said.
While there is no suggestion that products containing Russian aluminium would be transformed by market participants in the same way, this is clearly something on which the US will have a watchful eye.
Russian aluminium can, after all, still enter the US; it is just subject to a punishingly high level of duty.
What the administration of President Joe Biden clearly hopes is that its allies follow suit. A proclamation issued on February 24 even invited other countries to join the 200% tariff by offering them a permanent exclusion from Section 232 tariffs on aluminium imports into the US.
Things could get more interesting. If, for example, the EU, Canada and Mexico followed suit with tariffs, more commercial markets would become cost-prohibitive to Russian metal buyers while the war in Ukraine continued.
It would also probably push the LME to suspend the warranting of Russian metal in those locations. While this would be likely to have a more significant effect on markets, data released earlier this month showed that 93% of Russian aluminium in the LME system is already in Asia.
To return to the bigger question of how Russian aluminium products will be tracked: while there is clearly a move, not just by regulators but also by corporates, to improve the traceability of supply chains, this is still a work in progress.
With governments stepping up their efforts to achieve net-zero carbon emissions and to secure the critical raw materials necessary to accomplish these goals, there is increased focus on knowing the carbon footprint of material as well as its water content, land management and other sustainability metrics.
Regulation such as the Inflation Reduction Act in the US, meanwhile, requires the country’s companies to know the provenance of the critical minerals they use, while the European Commission is proposing the introduction of mandatory supply chain due-diligence obligations.
All of this will require technology, like the digital solutions provided by companies such as Waybridge, MineHub and Circulor, and it will in turn require industry collaboration to use it. Otherwise, attempting to know the origin of any material being imported will prove a futile exercise.