Alcoa to benefit from potential 200% Russian aluminum tax – Jefferies

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Following reports on Monday that the U.S. is set to impose a 200% tariff on Russian-made aluminum, Jefferies analysts said Alcoa Corp (NYSE:AA) will benefit.

The reported move by the U.S. is in response to the ongoing war in Ukraine and speculation of Russian aluminum being “dumped” on the U.S. market.

“US aluminum imports from Russia trended lower in ’22, and such steep tariffs should effectively end US imports of the metal from Russia and tighten the US market, in our view,” said analysts.

“While we remain cautious on aluminum in the near-term, Alcoa would stand to benefit from the likely end to US imports of Russian aluminum,” they add.

The analysts explain that in recent years, the U.S. has imported up to 90% of primary aluminum used in domestic manufacturing, mostly from Canada, with the imports subject to tariffs that directly impact the price and supply of aluminum in the U.S.

However, with Russian imports likely coming to an end due to the reported 200% tariff, Jefferies expects lower imports to weigh on supply-demand balances in the U.S. and lead to higher regional premiums.

“US-based sales have accounted for approximately 45% of Alcoa’s third-party sales over the last three years, and continued elevated US regional premiums should lead to high realized pricing versus benchmark LME for Alcoa. Redirected future sales in response to a tighter US market would clearly be a positive as well,” analysts concluded.