European regulators are mulling a radical increase in duties for Russian aluminium. However, they have not yet publicly explained who will end up paying for the hike: it is the buyers themselves, in the form of European industry or the final consumer, who will be hit hardest by the proposed duties.
EUReporter reports, that this metal has been in short supply in recent years, with the raw materials for its production consistently growing in price. Russian aluminium constitutes more than 10% of Europe’s total primary aluminium use, and more for some selected products, so a simple solution like finding a substitute is off the cards. With most producers on fixed contracts – many of them very long term – it will be impossible to quickly replace Russian metal, especially given the growing deficit of primary aluminium in the world caused by a slowdown in production growth in China.
As a result, Europeans will continue to buy RUSAL's metal, but at a higher price (taking into account the duties that will be paid to the EU budget). This will inevitably be construed by other aluminium producers and the market as a green light to increase their own prices, since the consumer is ready to pay more. For example, other major importers, Middle Eastern producers may be able to raise their prices quite to the level of Russian metal, using apparent supply-side deficit in the aluminium makret.
At the same time, European industry, which consumes almost 8 million tonnes of primary aluminium per year, will be placed in a hopeless bind: forced to buy much more expensive aluminium... and all because of the decisions of their own governments.
Since the European aluminium market is valued at around 47 billion euros, the potential addition of over 16 billion euros will lay a heavy burden on the shoulders of Europeans, enriching Arab and other importers in equal measure. This fee will be felt acutely, especially in view of the widespread increase in prices for energy and other resources. Not only would European industry risk losing its competitiveness in the world market, but the Europeans themselves would lose their standard of living and the high incomes they’ve become accustomed to due to a radical increase in the cost of general products. Is Europe ready to pay such a price?
