Likely Impact of the Russia Ukraine War on Aluminum Pricing

As Russia continues its operations in Ukraine, we will examine the possible impact on forging, casting, and industrial metals markets.

Why is there a Russia & Ukraine war?

• President Putin has not declared the real goals of the war. Most analysts and specialists believe the change in government in Ukraine to Pro-Russian and anti-NATO leader will likely satisfy Putin’s demands and lead to an end in the war.
• There is a real risk of Russia trying to annex two provinces of Ukraine’s west side – Donetsk and Luhansk.
• Russia is trying to draw its security area to map area, featured last in 1991 before official USSR broke down.
• With military support from NATO (Germany has pledged equipment, fuel, and money last week, and US Congress is likely to approve $6.4B in aid to Ukraine in equipment and military support), Ukraine could push this war into prolonged timing. With the rest of the world cutting off Russia from the Swift system as well as opposition from Russian people themselves, this could create financial distress in Russia, leading them to pull back from the war

Let’s examine the impact of this war and likely to influence the narrow impact of industrial forgings and castings.

Impact on Aluminum Supply and Pricing

Russia exports 4-6% of the aluminum supply of the world. When the US sanctioned Rusal’s largest aluminum foundry due to ownership disputes, LME went up by 35% within a few weeks. LME markets are at their historic highs already, with pricing around $3357 last week. Several forecasters see the possibility of aluminum touching $4000 / kg. This is the highest aluminum has ever gone up in its history, ever!

Impact on Nickel Supply

Russia exports almost 7% of raw nickel to global markets. Since the start of the year, nickel (like aluminum) is also trading at its historic high near $24,838 / ton. Nickel is an essential alloy in several blends of aluminum casting and extrusion alloys as well as high strength steels as well.

How long will war continue, and how long will supply disruptions / elevated pricing continue?

These materials are likely to stay high for several months as they are barely getting out of Supply Chain Disruptions from the last 18 months. Given the commitments from both sides and their history of resilience, our thought is that the war will go on for at least 4-5 weeks. Shortages in aluminum, nickel and other precious metals which Russia is a large provider for will suffer higher prices through at least Q3’ 2022.

On a personal level, we are rooting for a peaceful resolution and a quick end to this war. We hope this doesn’t continue past a month or so as the impact will be more devastating on millions of people living in that part of the world.

References:

• https://bit.ly/3K12xo3
• https://bit.ly/3McG21t