Just when European aluminum buyers thought the situation couldn't get any worse, the Russian government decided to slap export duties on aluminum ingot and billet, setting a base rate of 15% and a specific minimum of $254 per ton.

Following an official decree signed last month, export tariffs will be levied on approximately 340 nonferrous and steel products. Those HS codes beginning with 760110 will be covered in the case of aluminum products.

Aluminum market in Europe
The European aluminium seamless market is already extremely constrained for semi-finished aluminum products, and the situation is expected to worsen further. In many cases, mills have already reserved their space for the remainder of the year. Companies with capacity for the fourth quarter have increased conversion premiums by as much as 30% in the last few weeks, according to the most recent available data.

It is expected that the rising cost of Russian ingot and billet supplies will add to the already high delivery premiums for Rotterdam-bound goods. They will gradually increase the premiums for physical delivery to the Midwest United States and the Main Japanese Port.

Fastmarkets reported that the P 1020 premium in warehouse duty paid Rotterdam price increased from $250-$260 per ton in late June to $280-$300 per ton last week in Rotterdam, according to the company.

Effect of a knock-on
Europe and Asia both rely on Russia as a major supplier of primary aluminium tube. Physical delivery premiums in these two major markets are expected to rise, which will inevitably have a knock-on effect on the Midwest premium in the United States of America. No matter that Russia is no longer the primary metal supplier to North America that it once was, this remains true.

Steel and aluminum consumers in Europe had hoped that the conversion premiums would begin to decline toward the end of the year as the supply chain began to rebalance itself. Although it is becoming increasingly clear that a tight primary supply market, continued robust demand, and lengthening lead times at both flat rolled and extrusion mills will result in high premiums lasting well into 2022, the situation is becoming increasingly dire.

As a result, there is little indication that the price will soften prior to the year's end.