The European Union has been discussing the possible ban of Russian aluminium for months but stopped short of taking such measures, Reuters has reported. Apparently, EU policymakers recalled the 2018 incident when U.S. sanctions on Rusal, Russia’s largest aluminium producer, caused aluminium prices on the London Metal Exchange (LME) to surge by 35% in just a few days to reach seven-year highs.

If the EU decides to stop buying aluminium from Russia with new sanctions, it could cause a shortage and push aluminium prices up. Moreover, this move would come just after the EU decided to include aluminium in a special law called the Critical Raw Materials Act (CRMA). The CRMA helps the EU obtain the materials it needs to stay competitive globally, especially in making the economy more eco-friendly, similar to what the United States and China are doing.

The latest package of sanctions against Russia, introduced on February 23, did not include sanctions on aluminium. Reuters sources suggest that the bloc is expected to propose another package with new import bans.

But critics warn of negative consequences for many EU producers, highlighting that it could hinder their ability to maintain competitiveness, especially as they are already struggling with global inflation and high energy prices. In 2018, sanctions against Rusal, which offers a wide range of alloys and aluminium products for various uses and accounts for around 5% of global aluminium output, led to significant disruption in the global metals market.

The possible, politically driven ban would lead to a market reshuffle, sending LME prices for aluminium higher for consumers.

Thanks to its light weight and other unique properties, aluminium is widely used in a vast array of products and is indispensable for many sectors, including high-tech ones. It is used in the production of consumer packaging, healthcare and medical products. It is also a key resource for the transportation industry, from aircraft to the automotive sector, and is especially crucial to the production of electric vehicles, which are rapidly increasing in volume.

Europe’s access to aluminium from Russia helps rein in global prices for the metal. Russian aluminium is a strong competitor on the global market, largely due to its use of hydroelectric power from Siberian rivers in production. This reliance on renewable energy ensures a low carbon footprint for Russian metal, making it highly sought after by consumers aiming for a “green” economy.

The loss of Russian metal would leave Europe with a shortfall of around 500,000 tonnes, according to Reuters. In 2023, EU imports of Russian aluminium totalled 512,122 tonnes, or 8% of the total, down from 12% in 2022 and 19% in 2018.

“In our view, if the ban were to include some or all primary aluminium products (not our base scenario), it would likely be disruptive for Europe’s aluminium supply chain, bullish European premiums, downgrade Europe’s carbon footprint, erode European downstream competitiveness, be bearish all other regional premiums, and irrelevant for LME prices beyond short-term volatility,” the Harbor Aluminum industry think tank said in a report.

This article first appeared in New Economy Observer (NEO), a digital publication covering the intersection between finance and social responsibility, with a special focus on emerging markets. It offers news and analysis on major issues shaping the new global economy, including climate change and renewable energy, sustainable development, e-commerce and tech innovation, and the future of work.