On Monday April 30, the US extended the temporary aluminium import tax exemptions for Canada, Mexico and the European Union to June 1, from May 1 initially, while agreeing to permanent exemptions from the 10% import tariffs for Australia, Brazil and Argentina.

South Africa and New Zealand, both aluminium exporters, were excluded from the exemptions – both countries’ trade departments have said in separate statements thereafter that they were “disappointed” with the US for the exclusions.

The exclusion of South Africa and New Zealand from the exemptions means that aluminium supply from both countries could be diverted to Asia, or remain there, helping to somewhat ease any supply tightness that may arise if Australia-origin material heads to the US instead of Asian destinations due to former’s higher premiums, industry watchers said.

South Africa is home to South32’s 720,000-tonne-per-year Hillside aluminium smelter in Richards Bay. The company estimated in 2016 that about 80% of its production was exported – though it gave no official tonnages nor destinations for these exports.

“Hillside aluminium could gain more room in Asian markets. Middle Eastern and Asian brands could become more well-accepted by Asian customers, while Rio Tinto and Alcoa could serve the US market,” an Asia-based trader said.

“Premiums may not be affected much, however, because it will just be a rebalancing of supply,” he added.

New Zealand’s only aluminium smelter is New Zealand’s Aluminium Smelter (NZAS) in the Tiwai Peninsula. NZAS produces around 340,000 tpy of aluminium, with 90% of its production exported and Japan its largest export market. It is 79% owned by Pacific Aluminium – a wholly owned subsidiary of Rio Tinto – and 21% owned by Sumitomo Chemical Co.

While Japan imports aluminium from both South Africa and New Zealand, its imports from both countries are small relative to those from Australia, according to a second Asia-based trader.

In 2017, Japan imported 154,896 tonnes and 78,269 tonnes of aluminium from New Zealand and South Africa respectively, according to Japanese customs data. Meanwhile, Japan’s largest supplier, Australia, shipped 356,921 tonnes of the light metal to the Asian nation last year.

South Africa and New Zealand’s exclusion from the Section 232 exemptions is expected to also have a limited impact on the South Korean market because South African material is unpopular there due to a 1% import tax on the country’s metal, traders pointed out.

Aluminium that can be imported duty-free into South Korea – due to the free trade agreements that South Korea has with several aluminium-producing countries – is preferred. These nations include India, Australia, Canada and New Zealand as well as Malaysia and Indonesia under the Asean-Korea free trade agreement.

“New Zealand’s production could help supply Asia but its capacity is small compared to Australia and Canada. Hillside’s aluminium will not be much help either because end-users in Korea don’t really use them due to the import tax,” a third Asia-based trader said.

South Korea imported 27,031 tonnes of aluminium from New Zealand and 4,356 tonnes from South Africa in 2017, according to data from the Korea International Trade Association. These are in contrast to imports from its largest suppliers such as India and Australia, where India exported 385,816 tonnes and Australia exported 318,656 to South Korea last year.

Australia on the whole exported a total of 1.33 million tonnes of primary aluminium during its financial year ended June 2017.

Premium directions are now more dependent on whether the US sanctions on Russian aluminium producer UC Rusal remain or not, traders agreed.

The US’ recent loosening of sanctions on Rusal has given rise to bearish sentiment for aluminium premiums in the market because it is seen as the US allowing Rusal more time to sort out its entanglement with Oleg Deripaska and find a way to continue selling metal into the US.

The latest development saw the US Department of the Treasury give investors an additional month to divest or transfer their holdings in sanctioned Russian companies, including Rusal.

The US Midwest aluminium premium inched down this week following the latest developments in sanctions and trade policy in the US. The US Midwest P1020 aluminium spot premium was assessed at 21.5-22.5 cents per lb on May 1, down slightly from 22-22.5 cents per lb on April 27.

“Developments on Rusal are most important now. Looking at the news, it looks like the sanction issues on Rusal could eventually be solved and it might become okay to use Rusal metal again. If so, the market situation is going change again quickly,” a fourth-Asia-based trader said.

Aluminium market participants in Asia are largely adopting a wait-and-see attitude due to the recent changes in US sanctions and trade-related policies. The spot cif main Japanese ports (MJP) aluminium premium was assessed at $160-195 per tonne on May 1, unchanged from April 27, amid a lack of trading activity due to the week-long Golden Week holiday in Japan this week.