By Pratima Desai

LONDON (Reuters – Russia’s expectation that it will eliminate export taxes and increase global supplies has triggered an inventory selling that has slashed metal prices in Europe as well as the United States.

The drawdown in aluminum stocks in Europe, at approximately 1 million tonnes, and the United States at half a Million tonnes, is accelerating prices. Prices will likely fall even further.

Russia will not renew its 15 percent export tax on primary aluminumm exports (or a minimum $254 per ton) between August and December, after scrapping the duty on aluminium based alloys.

(GRAPHIC: Rusal’s aluminium sales – https://fingfx.thomsonreuters.com/gfx/ce/yzdvxljygvx/Rusals’s%20aluminium%20sales.PNG)

Rusal was the largest supplier of aluminium outside China and received 6% in global supplies last year.

The premiums for stock are extremely high. Oliver Nugent, Citi Analyst, stated that this can be an opportunity for profit taking if stock is held. The European premium is the most visible.

The benchmark price of aluminium (CMAL3) at London Metal Exchange is what consumers pay. Plus, there’s a premium which includes transport costs and duties.

(GRAPHIC: Costs of aluminium for consumers – https://fingfx.thomsonreuters.com/gfx/ce/byprjkowype/Costs%20of%20aluminium%20for%20consumers.PNG)

LME Aluminium at about $2,700/tonne has dropped 15% over the past 2 weeks. Meanwhile, duty paid premiums to Europe at $302/tonne have dropped 20% from a record-breaking $380/tonne in September.

The U.S. Duty Paid Premium at $606 Per Ton has declined 20% since mid-October’s all-time high.

(GRAPHIC: Aluminium premiums – https://fingfx.thomsonreuters.com/gfx/ce/jnpwexgdzpw/aluminium%20premiums.PNG)

There is an American 10% aluminum import tax from parts of the world. Due to the low price, the duty component fell $50 per tonne.

Jorge Vazquez from Harbor Aluminum, founder of Harbor Aluminum said that the price of aluminium should fall first to $2,200 per tonne in 2022.

Shipping problems that delayed delivery of metal to the United States are beginning to improve.

Vazquez reported that several breakbulk ships carrying (aluminium), from Europe to North America are in the process of arriving or already have arrived.

The U.S. premiums are at an all-time high. They will drop to 20 cents per lb (or $440 per tonne) by 2022.Mtl