From Friday, March 10, the import of all Russian aluminium products, such as unwrought aluminium, aluminium sheets, and finished products, including containers and other household items, made from aluminium is prohibited, Chrystia Freeland said.
It’s not going to change anything for now as far as aluminium markets are concerned, but it does increase the likelihood that Europe could implement a similar ban, the impact of which would be much more deeply felt.
If the impact is limited, it’s because Canadian imports of aluminium from Russia have been effectively halted since September, following Canada’s implementation in March 2022 of tariff measures consistent with the removal of Most Favored Nation status for Russia.
The 35% tariff in effect since then has worked as planned, stopping Russian metal imports to Canada.
The move follows the announcement by the US that it was imposing a 200% tariff on imports of Russia-origin aluminium along with derivatives products containing it.
This also had a limited impact: at 208,755 tonnes, Russian imports into the US accounted for just 3% of total imports of aluminium last year, according to data from the US Department of Commerce, Employment & Compliance.
After the US announced tariffs, the London Metal Exchange said it planned to suspend the warranting of Russia-origin aluminium and other metals in US warehouses.
Market participants have been self-sanctioning against buying Russia-origin metal due to the Ukraine war for some time.
Canada is a major aluminium producer – it operates nine smelters, eight of which are in Quebec, and produced 3.1 million tonnes last year. It is therefore a major exporter of the metal.
The country also supplies about 45% of US primary metal needs, with about 89% of Canada’s aluminium production destined for its neighbor. For its part, Rio Tinto is the largest producer of primary aluminium in North America, with about 75% its material supplying more than 35 US states.
History of Canadian aluminium
Rio Tinto’s roots in Canada, in fact, date back to 1902, when the Northern Aluminum Company Ltd, later to become Alcan, was founded in Quebec by Alcoa, then named the Pittsburgh Reduction Company. It was during the future First and Second World Wars that the relationship between Canada and the US intensified. By 1939-45, Canada supplied half the aluminium used by allied forces in planes and other military assets.
The Shipshaw power project was built at the Saguenay River, Quebec in 1943 and was a vital part of the ramp-up of allied manufacturing capabilities.
The defence link between the two countries has continued since. It has been enshrined in US and Canadian law for around 30 years, when the US federal code formally recognized Canada as a part of the US National Technology and Industrial Base for national security and defense planning purposes.
It is a two-way street: three out of every four cars sold in America contain aluminium from Canada, while one out of every three car and truck wheels manufactured in the US contains aluminium that Rio Tinto produced in Canada. Parts cross the border sometimes more than half-a-dozen times before finishing in a vehicle that ends up in a sales lot in either the US or Canada.
This integrated network is the reason why Section 232 tariffs, implemented by the US against aluminium imports from Canada, Mexico and the EU, were so devastating to the market when they were first imposed in 2018.
According to the government of Canada, the country imported $45 million tonnes of aluminium from Russia in 2021. In the same year, Canada exported $10.2 billion tonnes of primary aluminium worldwide.
With no LME warehouses in Canada, no Russian primary aluminium located in LME warehouses in the US, and around 96% of Russian aluminium located in South Korea, Malaysia or Singapore, there is no concern about units getting stuck in the system – for now.
Attention is turning to Europe, to see whether it imposes a ban or high tariffs, and how this might affect trade flows.
Also critical will be the response of the United Kingdom, where the LME decided not to suspend the warranting of Russian metal across its broader system. But it could potentially be pushed to do so in line with future government actions, impacting the roughly 200,000 tonnes of Russian metal in exchange sheds and causing chaos in the process.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Sign up today to receive Andrea’s content as it is published.
