Restrictions on Russian wire rod will have devastating consequences for European aluminium industry

The proposed inclusion of aluminium wire rod from Russia in the 12th package of EU sanctions has elicited mixed reactions within the industry. Written by Anthony Gill.

Francesca Donato, a member of the European Parliament, said in a statement that the restriction on aluminum wire from Russia could have devastating consequences for the entire European aluminium industry. 

Russia is the biggest off-shore aluminium wire rod supplier for the European Union. Possible sanctions will lead to an inevitable sharp increase in prices as well as an increase in the carbon footprint of the final goods produced out of wire rod. Besides, it seems to be unrealistic to replace this product which has the lowest carbon footprint in the industry promptly and in the required volumes for the EU companies. 

European buyers and processors of wire rod, which is used in the production of aluminium cables for green energy, argue that a ban on Russian products would lead to higher prices and increase the carbon footprint of their products. Companies in Italy, Spain, and Poland are expected to be particularly affected.

In the first half of 2023, Russia accounted for 17% of EU imports of aluminium wire (customs code 7605), used in connecting wind and solar energy facilities to power grids. Russian wire rod, produced using hydroelectric power, boasts a low carbon footprint of only 2.2 tons of CO2 per ton of product, which is 30%–70% lower than that of its global competitors. This is a critical consideration for buyers in the green energy sector.

Potential sanctions on specialised products such as wire rod are unlikely to damage Russia’s political regime. For buyers of wire rod in countries like Italy, Spain, and Poland, however, such a ban could pose significant challenges. They would need to seek alternative suppliers, possibly in India or the Middle East, where products may not only cost more but also have a higher carbon footprint.

Mario Conserva, the Secretary-General of the Federation of Aluminium Consumers in Europe (FACE), contends that including Russian wire rod in the 12th package of sanctions on Russia “will not help accelerate the end of the war in Ukraine; it will further redirect Russian low-carbon supplies that we so badly need to China and other competitors. It will deepen market anxiety and therefore contribute to price rises that will put hundreds of EU companies at risk of closure.”

In the first nine months of 2023, the European Union imported approximately 0.5 million tons of aluminium and aluminium products from Russia, worth a total of $1.26 billion. European Aluminium argues that it is time for Europeans to cease all aluminium imports from Russia.

FACE stresses that the aluminium sector is unique in that major private players have actively lobbied EU institutions for sanctions that would affect their sector, all in pursuit of “commercial benefits” for themselves.

Meanwhile, the industry group European Aluminium, comprising major global producers like American Alcoa and Norwegian Hydro, is advocating for a broader ban on all aluminium imports from Russia.

It is worth recalling the situation in 2018 when the United States imposed sanctions on Rusal, one of the world’s largest primary aluminium producers, driving up aluminium prices more than 30% and causing significant challenges for consumers of the metal around the world. Having seen the impact of unilateral restrictions on the global market, the U.S. government lifted its sanctions that same year.