Australia's exemption from the US' import tax on aluminum imports, set to take effect Friday, is expected to boost term contract shipments there, market sources said this week.
However, as the tax regulation is still taking shape, and there is no certainty about the longevity of Australia's exemption, market participants also said they would expect increased term volumes to the US to be gradual rather than drastic in the longer term.
Australia exported about 1.3 million mt of aluminum in 2017, with the US typically accounting for a small share, comprising under 1% last year.
Historically Australia's main aluminum export markets have been within Asia, with Japan, followed by South Korea, comprising the lion's share.
Market sources said it was initially thought that the tax was going to be applicable across the globe but then Canada, Mexico and Australia were granted exemptions.
Then overnight, US Trade Representative Robert Lighthizer announced that the European Union, Argentina and Brazil will not be subject to the tax as well.
"It feels like there may be room for further exemptions...How about the Middle East? We need to take it day by day...There are so many uncertainties," a trader said.
Market sources also said that any decrease in Australian shipments to Japan, South Korea and Taiwan would be readily replaced with tons from India, Malaysia, Indonesia, the Middle East and Russia.
"We are waiting for Australia to vacate Japan and Korea," a regional producer said. It would help facilitate an increase in his own trade into Asia's two largest importing centers, he said.
As global markets are closely inter-related, Australian suppliers would likely consider the big picture, and wait for the final ruling to be clear, before making major adjustments to their term contract trade flows, market sources said.
In the short term, market sources have noted that traders have been diverting earlier-committed Australian tons to the US, and seeking metal of alternative origins for customers in Asia.
Traders have been executing origin swaps in Asia, offering discounts to customers for giving up Australian units and taking supply from other origins instead, one source said.
According to another supplier source, customers have been asking to expedite shipments from India for loading in March, for discharge at ports in Asia.
When contacted, the Australian Aluminium Council declined to comment.
S&P Global Platts had also contacted Alcoa and Rio Tinto Alcan for comment but have yet to receive comments from either of them.
