Metal experts fear that recent US sanctions and the asset freeze against Russian entity Rusal could further tighten aluminum markets, especially outside China. It should be noted that Rusal accounts for 14% of World ex-China demand, a large part of which is exported to the US and close ally EU, which run large aluminum deficits.
In 2017, Russia exported 710,000 tons of aluminum to the US. In addition to the US, its ally the EU is a large aluminum export market for Russia. Aluminum markets in these regions may tighten further and it is possible that these exports are re-routed to other geographies.
Rusal accounts for close to 6% of global aluminum supplies and 14% of World ex-China supplies. The company is one of largest aluminum exporters to World, excluding China markets. It is estimated that the Russian aluminum exporter meets close to 10% of World ex-China demand. Sanctions against the company can have an adverse impact on the global aluminum supply chain.
On the other hand, post supply-side reforms, China has been more cautious in approving new smelting capacities with an emphasis on environmental sustainability. This will significantly slow down aluminum capacity growth in China post 2018. Analysts expect additional capacity of 3.3 mtpa in 2018 and only 1.3 mtpa in 2019, and much less than 1 mtpa in 2020. Given the strong demand growth in China, this will likely reduce surplus in Chinese aluminum markets.