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At 200%: US duty on imports of Russian aluminum may lead to higher prices in the US

Photo by Drahomír Posteby-Mach on Unsplash

From April 10, 2023 the U.S. imposed a 200% duty on imports of aluminum products that contain metal of Russian origin. This initiative was announced earlier by the President of the United States Joe Biden.

As noted by the head of the White House, aluminum production is a key part of the defense industry in Russia. Moreover, in 2022 Russia was the fifth largest supplier of the metal to the U.S., Biden said.

Against this background in an effort to put pressure on Moscow, on March 10 the U.S. raised the duties on imports of Russian aluminum and products made from it to 200%. However, experts believe that Washington’s actions are pursuing not only political goals, but also economic ones.

“By forcing such a competitor as Russia out of the market, the U.S. wants to create a sterile environment for domestic producers. That is, the United States seeks to protect its market and its own suppliers,” BitRiver financial analyst Vladislav Antonov explained to .

It is noteworthy that in 2000 the U.S. was the largest producer of primary aluminum in the world. Meanwhile, at the end of 2022 the output of this product in the country fell to 861 thousand tons, resulting in the country dropped to the ninth position on the list of major players in the global aluminum market. This is stated in the materials of the Congressional Research Service and the Geological Survey of the United States.

According to the agencies, today imports account for about 80% of domestic consumption of aluminum in the U.S.. Moreover, back in 2018, the target utilization rate of the metal production capacity was set at 80%, but now this figure fluctuates only near the mark of 55%.

According to Vladislav Antonov, the U.S. authorities want to stimulate the domestic production and make aluminum products in the country cheaper by means of duties. Nevertheless, at the first stages, the effect may be opposite, the expert did not rule out.

“Under the current market conditions the United States, together with the European Union, risks facing a deficit of aluminum. I think we will be able to see exactly how it will affect a number of strategic industries, including machine building, energy and aviation, already in the second half of this year,” Antonov suggested.

By the way, specialists suppose that the introduced 200% duty for products containing Russian aluminum will not improve the situation either in the USA or EU. Nevertheless, analysts do not rule out that other major suppliers of metal capable of taking up Russia’s share may be interested in worsening the situation on Western markets. We are talking, for example, about Mexico, Arab countries and China.

Moreover, for the Chinese, U.S. duties become a tool to strengthen China’s influence on the global economy. Thanks to the low cost of production by burning coal, the Celestial Empire has the potential to become the only country that can meet the growing global demand for aluminum, told member of the supervisory board of the Guild of Financial Analysts and Risk Managers Alexander Razuvaev.

As a result, against the background of Russia’s withdrawal from the U.S. market and the still insufficient growth of their own aluminum production capacity, Washington will have to actively buy the metal from other states. Analysts believe that imports will now cost the U.S. much more.

“After the imposition of duties there will be a decrease in competition and supply in the domestic U.S. market, due to which aluminum prices must rise. And when you replace Russian metal with products, for example, from the Middle East, logistics costs go up. The cost of transportation services will increase by almost a third, from $488 to $647 per ton, which will also affect prices for the end consumer,” Freedom Finance Global analyst Vladimir Chernov told .

At the same time, the specialist believes that the actions of Washington are unlikely to have a serious impact on Russia. According to the analyst, the supply of metal from Russia to the U.S. began to systematically reduce in the III quarter of 2022, when contractors stopped buying goods in anticipation of restrictions.

As a result, according to Chernov, in 2022 the U.S. accounted for only 4.6% of the revenue of Russia’s largest manufacturer of aluminum represented by RUSAL. By comparison, in 2021 the corresponding value was 6.2%.

“The company has already said that they will be able to redirect the falling out export volumes from the U.S. to alternative buyers. The company had plenty of time, because the introduction of that duty was talked about as early as last year. Probably, back in February 2022, RUSAL thought about reorientation of export flows and started to prepare the ground. Therefore, most likely, the restrictions will have almost no impact on Russia, because they are already prepared for them,” concluded Vladimir Chernov.

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