Aluminum stocks are on the rise today thanks to new reports on the United States’ international trade drama. It appears that President Joe Biden’s administration is considering a potential ban on Russian aluminum. This news is showing some big potential for U.S. aluminum companies, and that excitement is reflected in fluctuating market prices.
Aluminum is a massively important commodity. While not a precious metal, it is a very valuable material as a result of its conductivity, lightweight, and recyclability. The metal is used in building materials, airplane and car parts, kitchen utensils, appliances, military applications and more.
As a result of its versatility and wide uses, America has a high demand for the material, both manufacturing its own aluminum via private companies and importing the metal through a number of countries. The largest exporters of aluminum to the U.S. include Canada, China, Mexico, the UAE, Bahrain and Thailand. The country does also receive imports from Russia; about 10% of the U.S.’s aluminum comes from the Eastern European nation. While U.S. imports from Russia are low, though, the country remains dominant in the aluminum industry. Russian aluminum manufacturer Rusal is the world’s second-largest producer of the metal.
In the wake of the Russian invasion of Ukraine, though, supply chains have been disturbed and ethical dilemmas have piled up. The war is prompting much of the western world to impose harsh sanctions on the country, attempting to choke out the Russian economy. But while they talk a lot of talk, both the U.S. and the EU haven’t been picking and choosing which imports they are cutting Russia out of. In the wake of the war, U.S. and EU imports of metals like aluminum and nickel actually increased. This week, it seems like the U.S. government is trying to reel things back in.
Aluminum Stocks Win as Russian Aluminum Ban Is Teased
Aluminum stocks are big winners today. Alcoa Corporation (NYSE:AA) is rising over 5%, with trading volume nearly three times as high as an average session. Century Aluminum (NASDAQ:CENX) is up over 9% with a similar spike in volume.
These spikes are coming as investors expect an influx of business for American aluminum manufacturers. Spurring on these expectations are rumors that President Joe Biden is mulling over a ban on imports of Russian aluminum. As Bloomberg reports, three options are on the table regarding action against Russia. These options include an outright ban, raising tariffs to the point of an effective ban, and sanctioning Rusal specifically.
The decision reportedly comes as Russia’s tactics in Ukraine turn more violent. The country is ramping up bombing campaigns in Ukraine’s largest cities, and in a recent speech, Russian President Vladimir Putin signaled once again his willingness to threaten nuclear war.
By banning the imports, it is believed that competition might increase among U.S. manufacturers, spurring immediate gains. However, the effects aren’t all positive. Bloomberg reporters call attention to recent concern from U.S. officials that sanctions on aluminum could drive up prices. Those fears would appear warranted; since the article was published, aluminum prices immediately spiked upward by 7%. Rusal has warned that sanctions against it will destabilize the entire aluminum industry. Sanctions on the company in 2018 crippled Rusal, but they led to major supply concerns and large reductions in production and global workforces.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
