The European Union (EU) is gearing up to impose a gradual embargo on Russian aluminum, adding a significant element to its next sanctions package targeting Moscow. This policy shift is causing ripples in the aluminum market, leading to increased volatility in metal prices at the London Metal Exchange (LME).

The market’s recent rally, which saw aluminum prices spike to $2,637 per ton on Wednesday, January 29, has been tempered by geopolitical developments. The EU’s proposal to ban Russian aluminum is generating tension, with traders reacting nervously to potential disruptions in delivery routes. A gradual approach is expected, allowing a transition period of one year to import 275,000 tons of the metal, with individual EU member states managing import quotas.

The EU’s move is part of a broader strategy to sever trade ties with Russia, particularly in the wake of the ongoing conflict in Ukraine. Over the past three years, EU imports of primary aluminum from Russia have more than halved, reflecting a strategic pivot towards reducing dependence on Russian metals.

Meanwhile, former US President Donald Trump has reignited discussions on imposing tariffs on key metals, including aluminum, steel, and copper, advocating for increased domestic production. This has added another layer of complexity to the market dynamics, as global aluminum supplies face potential shifts.

While the EU has already banned certain aluminum products of Russian origin, a total embargo similar to those imposed by the US and the UK remains controversial. The EU is cautious, recalling the market chaos in 2018 when the US sanctioned Russian oligarch Oleg Deripaska, then a major shareholder in Rusal, a leading aluminum producer.

As the EU deliberates on its sanctions package, the outcome remains uncertain, with the need for unanimous approval from all 27 member states. The potential embargo underscores the EU’s resolve to align its trade policies with geopolitical objectives, but it also highlights the delicate balance required to manage the economic impacts of such measures.