BEIJING, Aug 18 (Reuters) - China's aluminium imports jumped 20.1% in July from a year earlier, customs data showed on Friday, due to low stocks and expectations for stronger demand in the autumn season. China, which is the world's biggest consumer of aluminium and also the biggest producer, imported 231,452 metric tons of unwrought aluminium and products including primary metal and unwrought, alloyed aluminium last month, according to data from the General Administration of Customs. That marked a 9.6% increase compared with June imports of 211,235 metric tons. The rise in imports came amid tight stocks of the light metal. Aluminium stocks on the Shanghai Futures Exchange hovered just above 100,000 tons last month, the lowest level since December and just a third of a March peak AL-STX-SGH. Investors were also expecting more stimulus by Beijing to boost economic growth, lending additional support to industrial metals. Demand from traditional consumers of the metal, including the transport, construction and packaging sectors was weak due to a summer lull and a sluggish economy. Imports for the first seven months were at 1.43 million tons, up 12.2% from the same period in 2022. Market participants attributed the increase to a surge in Russian inflows as Western buyers shied away from purchasing Russian aluminium. China imported 414,243 tons of primary aluminium from Russia in the first half this year, up 177.1% from the same period last year, customs data showed. That came against the backdrop of near-record high production of primary aluminium last month. Bauxite imports in the first seven months of the year totalled 84.98 million metric tons, up 12.2% from a year earlier, the data showed.

(Bloomberg) -- Citigroup Inc. has bought about $160 million of Russian aluminum from the London Metal Exchange, something many banks have refused to touch since the invasion of Ukraine. The US bank was behind requests to deliver about 75,000 tons of aluminum out of warehouses in Gwangyang, South Korea, that were reported by the LME on Friday, according to people familiar with the matter, who asked not to be identified discussing a private matter. The metal was originally produced by Russia`s United Co. Rusal International PJSC, they said. There are no blanket sanctions that outlaw trading in Russian aluminum, but it has nonetheless become a politically charged subject in the metals industry following Russia`s invasion of Ukraine last year. The US in February announced a 200% tariff on imports of Russian aluminum, saying the Russian aluminum industry had [played a major role in supplying Russia with weapons and ammunition used in the war." Some buyers and traders of aluminum, which is used across the construction, packaging and transportation industries, have sought to avoid supplies from Russia, either on ethical grounds or because it has become much harder to organize logistics and financing. And many banks have refused to trade or finance Russian metals since the war began. Citi itself had been avoiding metal produced by Rusal until recently, according to the people. Alongside competitors like Goldman Sachs Group Inc. and JPMorgan Chase & Co., Citi is one of a handful of banks that plays a significant role in industrial metals markets. It`s not clear what Citi intends to do with the metal, or whether it made the trade on its own or is working on behalf of a client. Aluminum contracts for immediate delivery have recently been trading at the widest discount to later-dated contracts in 15 years, creating an opportunity for traders or banks to earn a guaranteed return by buying and storing metal. Citi declined to comment. The role of Russian aluminum on the LME has been the subject of a furious lobbying campaign, with US and European producers arguing that a glut of unsold Rusal metal is distorting prices. Last year, the exchange considered banning new deliveries of Russian metal but ultimately decided not to. Since then, Russian aluminum has made up an ever-larger proportion of the exchange`s inventories, accounting for 81% of live stocks at the end of July. Producers including Alcoa Corp. and Norsk Hydro ASA have recently called on the LME to reconsider the issue. Some of the banks which continue to trade Russian metal draw the distinction between metal bought directly from Russian producers and metal bought via the London Metal Exchange. The latter case, they argue, does not involve any financing of Russian entities since payment is made to the LME`s clearinghouse. Citi`s purchase will bolster the exchange`s argument that Russian aluminum continues to flow out of its warehouses and therefore should still be allowed to be listed on the LME. [We closely monitor the levels and flow of Russian metal through our physical network, reflecting the behaviors of our underlying market users," a spokesperson for the exchange said on Friday. [We note that all metals of Russian origin continue to be consumed by a broad section of the market, and we will remain vigilant in respect of this matter."

[The place where we see some enthusiasm and willingness - selectively, not across the board - is the automotive segment," Dev Ahuja, executive vice president and chief financial officer, told Fastmarkets on Thursday August 3. [We do have customers who are wanting to have a commitment on the tonnes [of carbon per tonne of aluminium]. They are open to discussing a pass-through of the green premium." At a level of 4 tonnes of carbon dioxide equivalent (CO2e) per tonne of aluminium produced or lower, [there would be an openness and willingness to pay a premium," he said. Novelis is also focused on increasing the amount of recycled content in its automotive sheet products, Ahuja said, citing the company`s partnership with Sortera Alloys. The Atlanta, Georgia-based aluminium flat-rolled producer and recycler mainly purchases aluminium scrap to produce its sheet products, as well as primary aluminium and sheet ingots, according to Ahuja. Scrap typically represents 61% of its raw materials mix. Destocking in the beverage can market was a main reason behind lower revenue during Novelis` fiscal first quarter, ended June 30, according to the company`s earnings report released on Thursday. Quarterly revenue dropped by 19.61% year on year to $4.09 million, from $5.09 million in 2022. Net income in the quarter was $156 million, nearly half of the $307 million posted in the same quarter in the preceding year. [We do believe the worst of the can destocking globally is behind us," Steve Fisher, president and chief executive officer, said during the company`s earnings call on Thursday. [This quarter there was a lot of destocking that occurred in South America. We feel comfortable now that this is more-or-less in the rearview mirror, and we will start to see the volumes return - and have seen the volumes return - in the orderbooks in late June and July." The company also noted weak economic conditions in some specialty markets, including building and construction, but said demand for premium automotive sheet remains strong, evidenced by record automotive shipments. Shipments of rolled products totaled 879,000 tonnes in the first quarter, down from 962,000 tonnes in the first quarter of the previous year, with declines in all regions, including North America, Europe, Asia and South America. [Overall demand trends are starting to look very healthy, most importantly because the destocking phenomena has come to an end," Ahuja told Fastmarkets. In June, the aluminium recycler signed a long-term agreement with Coca-Cola Bottlers` Sales & Services Company to supply Coca-Cola`s authorized North American bottlers with aluminium can sheet. Novelis`s Bay Minette project in Alabama remains on track for commissioning in the latter half of fiscal 2026, Fisher said during the earnings call. About two-thirds of the facility`s multi-year contracts will be signed with companies in the beverage can industry, and one-third with automotive, according to Fisher. The company will finalize its last contract for the beverage can industry [in the next month or so," while automotive contracts will be finished over the next 12-18 months, he said. [It is possible that we could be at full capacity at this facility within a couple of years, which is quite aggressive," he added. [Last year we were struggling with some supply issues off and on. Right now, I can tell you that supply availability is very good. Scrap spreads are steady-to-positive." [Customers have committed enough volumes to be able to use up all of the canned production capacity that we are planning to have," Ahuja told Fastmarkets. [We are well on track to be able to get the entire capacity committed." Fastmarkets` assessment of aluminium scrap used beverage cans, domestic aluminium producer buying price, fob shipping point US was 67-71 cents per lb on August 3, up by 4.55% from 64-68 cents per lb a month earlier but 9.21% lower than 74-78 cents per lb a year prior. (The fifth paragraph of this report was updated on Saturday August 5 to clarify the scrap percentage of Novelis` raw materials mix.)

In its second quarter, which ended on June 30, Constellium`s packaging and automotive rolled products (P&ARP) segment reported a 7% year-on-year decrease in shipments at 272,000 metric tons due to lower shipments of packaging and specialty rolled products, which were partially offset by higher shipments of automotive rolled products. The segment`s revenue of €1 billion ($1.1 billion) was down by 22% year on year primarily due to the decreased shipments and lower metal prices, which were partially offset by improved price and mix, the company said. The P&ARP segment`s adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) was down by 17% year on year in the second quarter due to the lower shipments and higher operating costs, which the company linked to inflation, operating challenges at its Muscle Shoals facility in the US state of Alabama and unfavorable metal costs. The segment`s first half 2023 results also cited the same factors, which saw its adjusted Ebitda drop 24% to €134 million, shipments fall 7% to 531,000 metric tons and revenue decline 17% to €2.1 billion, all on a year-on-year comparison. Fastmarkets reported earlier this year that the packaging sector had started to weaken for many in first-quarter results for aluminium producers, with this trend now continuing into the second quarter. Aluminium premiums across the key global markets have been on a downward trend during the quarter amid poor consumer demand. Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $280-300 per tonne on July 25. The premium has been falling steadily during the last quarter, with a monthly average of $300-327.78 per tonne in June, $315.56-340 per tonne in May and $320-340 per tonne in April. Constellium`s automotive structures & industry (AS&I) shipments were down 8% year on year in its second quarter at 66,000 metric tons due to lower other extruded product shipments, which were partially offset by higher shipments of automotive extruded products, it said. The weaker P&ARP and AS&I sector shipments were reflected in the 6% year-on-year decrease in group shipments to 398,000 metric tons in the second quarter, down from 424,000 metric tons, as well as a 14% decrease year-on-year in revenue to €2 billion. For the first half of 2023, group shipments were down 5% year on year to 787,000 metric tons and revenue down 8% to €3.9 billion. Group adjusted Ebitda of €374 million for the first half of 2023 was up 2% year on year due to strong performance by its Aerospace & Transportation (A&T) segment, which partially offset weaker results in the P&ARP segment. The European Automotive Manufacturers Association (Acea) reported that in June, the European car market grew by 17.8% to 1 million registered units, while in the first half of 2023, new EU car registrations increased significantly by 17.9%, reaching 5.4 million units. But it noted that cumulative volumes are 21% lower compared to 2019. [The recovery in automotive continued with higher shipments in both rolled and extruded products. Packaging shipments were down in the quarter as demand remained below prior year levels, and we continued to experience weakness in most industrial markets, especially in Europe," Jean-Marc Germain, Constellium chief executive officer, said. Elsewhere, the aerospace sector continues to perform well, remaining a key source of demand for the aluminium sector. Germain said the A&T segment`s record quarterly adjusted Ebitda was supported by continued strength in aerospace demand. Constellium noted that its robust A&T segment continues to help offset other weak sectors, with its second-quarter adjusted Ebitda rising 53% year on year due to improved price and mix, partially offset by higher operating costs mainly due to inflation and increased activity levels. The segment`s shipments of 60,000 metric tons in the second quarter were flat year on year, while revenue of €464 million was also relatively stable. The A&T segment`s first half of 2023 adjusted Ebitda increased 46% year on year to €169 million, as did revenue of €916 million, which increased by 8%, primarily due to higher shipments and improved price and mix. Shipments of 118,000 metric tons in the period were up 2% compared to the first half of 2022 on higher shipments of aerospace rolled products, partially offset by lower shipments of transportation, industry and defense rolled products. Germain praised the company`s results, despite [significant inflationary pressures." Despite the ongoing headwinds, Constellium has raised its guidance for its adjusted Ebitda. [Based on our strong performance in the first half of this year and our current outlook for the second half, which assumes no major deterioration on the macroeconomic or geopolitical fronts, we are raising our guidance and now expect adjusted Ebitda of €700 million to €720 million in 2023," Germain said.

Rising supply headwinds for aluminium prices The Chinese government is under immense pressure to support the country`s sluggish economic recovery. During a meeting of the 24-member Politburo of the ruling Chinese Communist Party, China`s top leaders signaled that more support is on the way to help its troubled real estate sector, boost consumption and resolve local government debt. But they fell short of unveiling the large-scale stimulus package that everyone has been waiting for. However, the prospect of rising metal supplies from China continues to act as a headwind to higher aluminium prices. During the first half of 2023, China`s total primary aluminium production reached 20.16 million tonnes, a 3.4% increase compared to the corresponding period in 2022. Rising aluminium output from China supports our bearish medium-term bias on the light metal. Learn more. Positive stance unchanged for copper prices We predict an optimistic outlook for copper prices in the coming months. Our price prediction is largely influenced by the anticipated weakening of the US dollar as the Federal Reserve`s rate hike cycle nears its conclusion. Coupled with this, we also see China`s growth accelerating, spurred by the implementation of additional stimulus measures. One of the stimulus measures being considered is lowering mortgage rates which should help to boost homebuying in the nation`s largest cities and ease fears in the property sector. We expect the outcome to be constructive for copper prices. Interestingly, Comex`s speculative positioning being net short suggests that many investors might be caught off guard by a potential surge in copper prices. This misalignment provides an opportunity that astute investors could potentially exploit. Learn more. Heatwaves potentially bullish for demand and lead prices Overall, the global lead market looks balanced, so it is unsurprising that lead prices remain rangebound. But there are regional imbalances with the world ex-China showing a deficit and relying on exports from China. Recent developments, mainly China`s stimulus focused on the auto market and the heatwave hanging over large parts of the Northern Hemisphere and likely damaging lead-acid car batteries, are expected to be a bullish factor for lead demand. Lead-acid batteries, especially older ones, tend to suffer in extreme weather conditions, whether it be cold or hot. Indeed, extreme heat tends to be a bigger problem than extreme cold. So, the heatwaves that are seeing extreme temperatures across large parts of the Northern Hemisphere are expected to result in a large number of battery failures, which will boost demand for replacement batteries. Learn more. Nickel prices not out of the woods While nickel has demonstrated some robust support in July, we still expect higher nickel prices in the medium-to-longer term. However, we are not convinced that the summer lows are behind us, as data warns that nickel demand may not benefit from the growing demand for Li-ion batteries in the biggest electric car market. The China Automotive Battery Innovation Alliance (CABIA) showed China`s preference for nickel-free lithium iron phosphate (LFP) batteries continued to grow, with the country`s output of these batteries rising by 11.64% month on month to 42.2-gigawatt hours (GWh). Sharp upturn for tin prices in Q4 Despite recent sideways trading, tin prices are projected to exceed $30,000 per tonne in the coming months. This forecasted rise in tin prices is due to strong market resilience driven by a heavy backwardation in the LME tin market, the looming mining ban in Myanmar and the potential depletion of the currently ample Shanghai Futures Exchange`s tin stocks. A pronounced price escalation is likely, particularly if supply constraints persist and China`s economic growth accelerates in Q4 2023. Learn more. Fundamental revision reflects zinc price weakness Accommodating for high utilization rates by Chinese smelters, we have cut our outlook for global demand growth to reflect slowing economic conditions. The net effect implies a 164,000-tonne surplus in 2023, compared with the 67,000-tonne deficit forecast previously. While our forecast implies the worst of the oversupply is weighted to H1 and may already be priced in, with a further annual surplus forecast for 2024, we see limited upside risk for zinc prices in the longer term. Learn more.

Sucden Financial`s head of research, Daria Efanova, said at the company`s third-quarter metals webinar, [We continue to pay attention to the Beijing story and stimulus in particular." She added that [we have seen some recent upside in base metals, supported by the release of stimulus measures by China. The Politburo meeting last week, especially, really propped up confidence." Efanova noted that specific policies have been directed toward the supply side, with not much intended to prop up demand, especially in the consumer sector. [Confidence remains low, which remains a key detriment to consumer spending," she said. [So while positive news keeps propping up prices on the day, when they test those resistance levels they fall back down. So we`ll continue to see the effects of the stimulus- in the real economy." China`s demand for base metals China demand has been a dominant theme for base metals so far in 2023, and it was a key focus in Sucden`s first-quarter and second-quarter webinars earlier this year. On a year-to-date basis, zinc remained among the poorest performing base metals, Efanova said, with the price falling by 20% and weakening significantly in the second quarter, although that downside momentum stalled in July. The three-month zinc price was $2,482.50 per tonne at the 5pm close of trading on the London Metal Exchange on August 2, compared with $3,002 per tonne at the start of the year. This was linked to lower demand from the construction sector. [Demand weakness plus increased mining supply really helped to push prices lower during the [second] quarter. We saw stock levels on the LME rise quite sharply over the quarter," she said. Zinc stocks totaled 97,925 tonnes on August 3, compared with 30,475 tonnes at the start of the year. Despite zinc prices falling quite significantly, we continue to see a threat to European smelter production, especially in the fourth quarter. [Despite zinc prices falling quite significantly, we continue to see a threat to European smelter production, especially in the fourth quarter," Efanova said. This was despite the falling price of natural gas, which has kept profit margins low. [Only 20% of smelters can produce above the cost of production," Efanova said. [With policy support remaining marginal, we expect zinc prices to remain low in the third quarter." Aluminium demand outlook On aluminium, Efanova said that, in line with the other base metals, the light metal`s price fell by 11% over the second quarter, having felt the brunt of central banks` policy decisions, because it was [the most macro dependent metal." [It remains true that the lower demand outlook and the central banks have really affected base metals overall," Efanova said. [Aluminium, being the most macro dependent metal, has really felt the brunt of the central banks` [actions], despite the US economy remaining robust from the labor standpoint, and even [on the] consumer side. We continue to expect central bank activity to affect aluminium in the third quarter." In China, despite smelter restarts in Yunnan province, maintenance outages in other regions outweighed the gains, while the threat of drought still posed a risk to capacity. [We expect operating capacity to come back online again, thanks to Yunnan smelters coming back into the market, but it won`t be enough to drive sustainable gains from the supply side on a year-on-year basis," Efanova said. She added that the energy situation was still a key factor in China, with the risk of drought when the weather became hot once more. [We have seen rationing be implemented at key aluminium smelters to preserve energy," she said, adding: [We remain cautious of history repeating" – referring to the 20% of output that was lost in the Sichuan region in August 2022. [The demand side outlook [is limiting] the upside gains we could have seen in supply," she added. [The market was a bit impatient with Chinese support," Efanova said. [When we have seen positive news out of China, the gains were not sustainable. And until the market sees sustainable recovery and economic growth in China, we will struggle to see a long-term fundamental shift higher, especially on aluminium." Copper demand picks up In line with copper, she added, [We are wary of supply risks. But with demand being so muted, we expect a quieter third-quarter performance." Despite the mixed picture on stimulus and economic recovery, demand for copper concentrates was picking up in China, Efanova said. Ore imports into China continued to grow rapidly, by about 20% month on month in April, which saw treatment charges rise to more than $90 per tonne. Fastmarkets calculated the copper concentrates TC index, cif Asia Pacific, at $88.90 per tonne on July 28, and the corresponding copper concentrates RC index, cif Asia Pacific, at 8.89 cents per lb on the same day, the highest levels since October 2018. [Copper seems to be quite sensitive to the stories from the macro standpoint and from China," Efanova said. [Even though demand is quite significantly lower, this hasn`t had a fundamental effect on prices. The spread remains in contango, suggesting that it is not necessarily transferring to the physical market. We believe that the importance of stocks- coupled with a lower demand outlook, is having less of an effect on base metals, and copper in particular." Stocks of the red metal totaled 76,875 on August 3, compared with 88,550 tonnes at the start of the year, briefly reaching 100,000 tonnes in early June before falling again. Elsewhere, nickel and zinc also showed strong downside moves during the quarter, linked to the same factors – China, central banks and construction materials. [As of now," Efanova said, [the support level of about $20,000 per tonne [for nickel] is holding firm and the spread is remaining in contango – again, highlighting that demand is not outstripping supply. In particular, the stimulus story and a slight recovery in steel demand are not enough to drive physical tightness." Nickel`s cash to three-month price spread was recently in a $205 per tonne contango. [[Demand for use in the batteries for] electric vehicles remains a key factor in understanding the longer-term narrative for nickel," Efanova said. [We expect [that sector] to drive an upside gain in the longer term, but for the third quarter [of 2023] we don`t yet see it as feasible, and not sufficient to drive prices higher." Supply from China is recovering, Efanova said, with smelters returning from maintenance outages in the third quarter, although this would not result in what she would describe as a [fully fledged recovery." Visit our dedicated base metals price forecast hub to understand the complex market conditions influencing price volatility. Learn more.

The company plans to produce 300,000 tonnes of cans, 200,000 tonnes for automotive products and 150,000 tonnes for industrial products at the plant, which is the first such facility in the US to be built in 40 years. SDI`s chief executive officer Mark Millett said during the company`s second-quarter earnings call on Thursday, July 20, that he believes that buyers [panicked" in 2022 and loaded up on can inventories, much of which still has yet to be used. But given consumers` sustainability-driven shift away from the use of plastic packaging for bottled water and other fluids, by the time the Columbus mill comes online in mid-2025, any excess inventory will have cleared. [In all honesty, when our mill comes up, I think that the marketplace is going to be in a beautiful place for us to receive from," Millet said. There have been signs of short-term bearishness in the aluminium can market demand, with weaker demand weighing on the first-quarter earnings of aluminium producer Constellium, which shipped fewer cans and specialty-rolled products. In addition, Ball Corporation plans to close its Wallkill, New York, beverage packing facility on August 31, the company confirmed to Fastmarkets on June 2. The company has also closed facilities in Phoenix, Arizona, and St Paul, Minnesota, in the past year and said it will delay the construction of a new plant in North Las Vegas, Nevada. Aluminium market demand In addition to investments by SDI and Ball, MetalX and Manna Capital Partners said in April that they will invest $200 million to build a 100,000 tonnes per year ultra-low-carbon aluminium rolling slab mill in the US Midwest, which is scheduled to come online by the first half of 2026. In July 2022, SDI announced it would spend around $2.2 billion, which has since been upgraded to $2.5 billion, on the Columbus facility and two remote recycling plants to help feed it. The company remains bullish on the can sector`s promise in the long term, Millett said. He added that while he didn`t share in post-Covid-19 projections that aluminium demand would be sufficient enough to support multiple new US mills, his company believes that automotive and beverage growth will continue apace. [We certainly feel there`s more space to satisfy our market share," he said. Export demand for US used beverage cans (UBCs) has grown since SDI`s investment announcement. From January-May 2023, exports of UBCs rose 7.77% to 199,493 short tons, while imports decreased 5.01% to 86,525 tons year on year. Prices for UBCs, however, have declined significantly since March 2022. Fastmarkets` aluminium scrap used beverage cans, domestic aluminium producer buying price, fob shipping point US hit a high of $1.32-1.35 per lb on March 31, 2022, but fell to $0.73-78 per lb in July 2022. The price was last assessed at $0.66-0.70 per lb on July 20. Impact on scrap and aluminium markets In addition to steelmaking, SDI is one of the US` largest metal recyclers, producing approximately 5.3 million gross tons of ferrous scrap and 1.054 billion lbs of non-ferrous scrap in 2022. The company produced 1.52 million gross tons of ferrous scrap in the second quarter of 2023, a 12% increase year on year, with nearly 580,000 gross tons shipped externally. The company`s average ferrous scrap cost per ton melted at its steel mills rose by $31 per ton to $444 per ton in the second quarter compared with the first quarter of 2023, the company said. At the same time, SDI produced 280 million lbs of non-ferrous scrap during the second quarter, a 5% increase year on year. Millett said that he expects scrap prices to [fluctuate modestly" during the rest of 2023, and anticipates a seasonal rise in the third quarter. He predicts the market could see some [moderating again" in the fourth quarter. Kirstyn Petras in New York City contributed to this story

The next logical step would be for Switzerland-based miner-marketer Glencore to grow in aluminium. The case is especially compelling given that Glencore`s near seven-million-tonne aluminium supply deal with Russian producer Rusal, via its parent EN+ Group, comes to an end in 2024. Company chief executive officer Gary Nagle told an earnings call during the company`s 2022 results in February that Glencore`s contract with Rusal is a volume, not term, contract and should end [sometime probably towards the second half of next year." It was signed, Nagle confirmed, before the Russian invasion of Ukraine led many Western corporations and governments around the world to step away from doing business with and in Russia. Glencore has a 10.6% stake in EN+ Group, a stake it said it was reviewing last year but eventually concluded it had no realistic way of exiting. Rusal supply deal Rusal has supplied Glencore with aluminium on and off for years. The current contract dates back to 2020, with an option to extend it to 2025. While the final terms are unknown, Rusal`s board agreed to the proposed terms in 2019 and published them in a filing to the Hong Kong Stock Exchange in 2020. Rusal`s terms allowed Glencore to purchase up to 6.87 million tonnes of primary aluminium, including up to 344,760 tonnes in 2020 and up to 1.632 million tonnes for each year from 2021 to 2024. The contract agreed by Rusal also permitted either party to increase sales by as much as 70,000 tonnes in 2020. In 2021-24, Rusal had the option to increase or decrease the yearly tonnage of primary aluminium by up to 200,000 tonnes. It also had the option to postpone up to 10% of each yearly tonnage of primary aluminium supply to 2025, in which case the contract would be extended by a year. The sales contract agreed by the Rusal board also gave Glencore the option to buy up to an additional 200,000 tonnes of primary aluminium per year from 2021 to 2024, while Rusal had the right to increase its yearly tonnage of primary aluminium supply by up to a further 200,000 tonnes, in addition to the other potential increase in sales. That contract was predated by a seven-year supply contract from 2012 through 2018, which expired when Rusal and its founder, Oleg Deripaska, were subject to sanctions by the United States. Under the terms of that contract, which were never made public, Rusal committed to sell the majority of its primary production to Glencore. The companies have been intertwined since the beginning: Rusal was formed in 2007 following the merger of its assets with smaller domestic rival Sual and the alumina operations of Glencore. Glencore could, of course, extend its contract with Rusal to 2025. It could also opt to renew it, although the pressure to boycott doing business with Russia has intensified as the war in Ukraine has continued. An end to the war could alleviate the onus for Glencore to avoid the deal too. Either way, it`s a sizeable chunk of metal to lose from your portfolio. Bauxite and alumina Growth in aluminium also makes sense from the perspective of Glencore`s recent spate of merger & acquisition activity. On Tuesday, April 25, Century Aluminum, in which Glencore has a 46.1% stake and an offtake deal for around 60% of its aluminium, announced it had bought a 55% stake in the Jamalco alumina refinery. This was swiftly followed by the news earlier on Thursday that Glencore had acquired a 45% stake in Brazil`s largest bauxite producer, making it the largest shareholders, and a 30% stake in major alumina producer Alunorte. Gobbling up stakes in high-quality bauxite and alumina assets like those in Brazil makes sense. The raw materials are the key ingredients for aluminium, a metal that is key to light weighting in manufacturing and has become a sector leader in the creation of low-carbon products over the past decade. Glencore has been working to position itself deeper in sustainably produced metals that are critical to the energy transition, including recycling and battery raw materials. It is a major trader of aluminium, but the company`s own industrial activities in the aluminium supply chain have been limited in recent years. In Australia, Glencore is assessing the feasibility of developing a new bauxite mine near Aurukun, Queensland, in partnership with a unit of Mitsubishi. It also has a 31.7% stake in an alumina refinery in Indonesia. The bulk of its activities in the upstream segment were focused on marketing products from a range of third-party aluminium and alumina producers. That includes a 10-year alumina supply and aluminium offtake agreement with Malaysia`s Press Metal Bintulu Sdn. Bhd., signed last year. It`s not clear exactly how much alumina and aluminium the company sells each year because it groups the products together. According to the company`s annual report, it marketed 10.0 million tonnes of alumina and aluminium products in 2022, up 12% from 8.9 million tonnes in 2021. But what is clear is that if Glencore decides its Rusal contract is off limits in the future, then it will more than likely look for an alternative, whether through M&A or partnerships. 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.

MetalMiner actively posts on a variety of metals and market developments. However, we prefer to discuss topics that our clients bring to us, especially those that keep buyers awake at night. One such topic that has been recurring over recent months is the anxiety surrounding the LME aluminum quotation. Specifically, there has been a lot of talk over the LME`s potential failure to reflect the true value of global aluminum prices. Although it may be an oversimplified statement, it is essential to note that there is no single global aluminum price. Instead, every market in the world has primary aluminum prices. That said, the London Metal Exchange quotations broadly influence these prices, factoring in premiums and discounts to account for local costs, taxes, and supply/demand pressures. The primary concern keeping buyers up at night is the supply/demand position. Specifically, the worry stems from the oversupply of Russian aluminum and the limited supply of non-Russian metal on the exchange. This situation could potentially lead to an excess of the exchange`s metal coming from a supply source that too few buyers are willing to use. This, in turn, could cause the LME price to trade at a discount to its actual value. Last month, we reported wild swings in the Contango/Backwardation on the LME. This mainly stemmed from traders competing for parcels of non-Russian brands. However, the scarcity of non-Russian metal has far-reaching consequences beyond the exchange itself. According to Reuters, Russian brands accounted for approximately 80% of the warranted aluminum stocks on the LME by the end of June. Moreover, the situation has likely worsened since then. Asian warehouses store a significant portion of this metal, as China has been the largest consumer of Russian metal, both directly and from the LME. Nevertheless, Reuters observed that China`s appetite for Russian primary metal seems to be weakening. Last year, the trade between Russia and China was robust, with China exporting Alumina to Russia and receiving primary ingots in return. This trade was advantageous for China, especially during a drought in Yunnan that curtailed its smelting capacity. Indeed, Chinese imports of Russian-brand primary aluminum increased from 291,000 metric tons in 2021 to 462,000 metric tons last year. The pace of imports accelerated further during the first half of this year, with Russian metal imports surging by 177% year-on-year to 414,000 metric tons. At the time, Russian aluminum accounted for 85% of Chinese imports.

Aluminium prices have stayed around $2,177 per tonne in the ongoing quarter. Notably, these prices are significantly lower than they were during the previous year. LME aluminium prices had averaged $3,273 a tonne and $2,883 a tonne during the first and second quarters of 2022, respectively. Aluminium prices remained firm during the first half of 2022 after Russia invaded Ukraine. However, weakening global demand amid recession concerns in the rising interest rate environment have pulled down prices since then. The China demand, which was anticipated to pick up during 2023 after easing of covid curbs, also did not meet expectations. The decline in LME aluminium prices impacted profitability of leading aluminium makers in the June quarter. The aluminium segment of Vedanta Ltd that contributed around 35% to its overall revenues, saw a significant decline in the operating performance. The segment`s Ebitda (earnings before interest tax depreciation and amortization) declined 6.24% sequentially and 16.8% year-on-year (y-o-y). The company`s profit before tax thereby declined 4% sequentially and 43% y-o-y. Hindalco also felt a similar impact. Ebitda of the aluminium upstream segment was down 41% y-o-y and 11% sequentially. Thus, despite a sequential improvement in operating performance by the company`s US subsidiary Novelis, a better performance by the company`s aluminium downstream business and a y-o-y profitability improvement in the copper segment, consolidated net profit of Hindalco was flat sequentially and down 41% year-on-year. The solace for aluminium manufacturers, however, comes from coal prices which have been coming down since November 2022. Coal prices are expected to stay muted in the current fiscal due to sufficient availability in the global market, subdued global demand and gradual adjustments of the global markets to the Russia-Ukraine war, said CareEdge Research. Since aluminium production is an energy intensive business, the declining coal prices mean reduced power costs, which may support the profitability of aluminium manufacturers. For Hindalco, the prospects are supported by its US subsidiary Novelis, which is a converter of aluminium and feels lower impact of aluminium price volatility. The volumes of Novelis remained impacted by channel destocking in the US. That is over and some restocking has started in the ongoing quarter. The company`s copper and downstream aluminium businesses are also performing well. For natural resources conglomerate Vedanta, the prospects will also hinge on other base metal prices such as that of zinc and lead. Also, it has exposure to oil production, iron-ore and a power business as well.