Experts commented on the new aluminum price formula

The new formula for calculating the cost of primary aluminum may reduce the price of the metal for Russian consumers, but a significant reduction in price should not be expected due to the global nature of the market, experts say.

Earlier, "Rusal" announced the development of a new formula for the price of primary aluminum for Russian customers. The cost is proposed to be determined based on the weighted average stock market quotations in export markets, taking into account the share of each of them in the company's supply structure. In the coming days, "Rusal" will send customers an offer on the transition to a new pricing mechanism.

Pavel Petrov, Senior Consultant at S+Consulting, noted that the proposed approach reflects the changed structure of Russian aluminum exports. According to him, the new mechanism will reduce price volatility for domestic consumers. The use of several regional indexes of the London Metal Exchange (LME) protects the Russian price from fluctuations in individual markets, and the Shanghai Futures Exchange (SHFE) index is less susceptible to global speculative fluctuations, the expert explained.

"The potential price effect of the new formula for Russian consumers is relatively small — a reduction in the cost of aluminum in the range of $40-100 per ton," Petrov said. He explained this by saying that metal prices in different regions of the world do not differ so much that, given the change in the formula, this would lead to a significant decrease in the cost of aluminum in Russia.

Independent expert Leonid Khazanov also noted that the new formula takes into account "Rusal"'s export market geography, including Asia, Europe, Africa and America. "The price according to the new formula turned out to be lower, thereby opening up the opportunity for Russian aluminum processors to reduce the cost of their products or increase their own profitability," he said.

At the same time, Khazanov stressed that it is impossible to significantly reduce the cost of aluminum by changing market formulas, since the metal is a global commodity and is sold on open markets on comparable terms.