Sep 1, 2022
Aluminum Buyer Novelis Excludes Russian Metal in Key Supply Deal
(Bloomberg) -- Novelis Inc., one of the world’s biggest buyers of aluminum, said it won’t accept Russian metal in potential new deals to supply its European factories next year, a move that may set the tone for upcoming contract negotiations across the industry.
Russia is a key producer of aluminum, nickel and copper, none of which have been sanctioned by Europe or the US. While some in the industry -- particularly in Europe -- have been trying to avoid Russian metal since the invasion of Ukraine, much of the global trade takes place through annual or multi-annual deals that were already in place when the war started.
Novelis, owned by India’s Hindalco Industries Ltd., is one of the biggest manufacturers of aluminum products. It issued a tender this week for 2023 supply to its European plants that specified no metal of Russian origin would be allowed as part of any deals, a spokesperson for Novelis confirmed in response to questions from Bloomberg.
Existing Novelis contracts that allow for the supply of Russian metal won’t be affected by the new conditions, said two people familiar with the matter.
Read: Metals World Agonizes Over War But Keeps Buying From Russia
The aluminum industry is currently gearing up for what’s known as the “mating season,” when metal buyers and sellers negotiate contracts for the following year’s supply. Europe is the key buyer of Russian metal, and if others follow Novelis’s lead it could force Russian producers to find new buyers, resulting in a large-scale reorganization of current trading relationships.
The discussions will also take place against the backdrop of mounting pressure on European aluminum supply. Soaring energy costs are squeezing margins in the hugely power-intensive industry, forcing smelters to reduce or even stop production and potentially increasing the region’s reliance on imports.
(Adds new context on existing contracts in fourth paragraph)
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