Tuesday, 20 November, 2018

Rio Tinto braces for U.S. sanction damage on Rusal

Rusal shares plummet to new low Rio declares force majeure in wake of US sanctions against Russia
| 19 April, 2018, 06:30

Commerzbank's head of commodities research Eugen Weinberg said other traders were likely to declare force majeure following the Rusal sanctions.

USA sanctions on major aluminium producer Rusal have pushed aluminium prices by more than 20 percent since the sanctions began earlier this month.

"We have requested Rusal stop shipments of aluminium for our term contracts as we can't make payment in U.S. dollars and we don't want to take the risk of becoming a secondary sanction target by the United States", said a source at a trading house.

"They (Rusal) do not know what to do yet, what is going on with them; that is why all transportation operations are suspended", TransContainer's Chief Executive Petr Baskakov told reporters in Moscow on Tuesday.

The company's Japanese customers include Mitsubishi, Marubeni, Sumitomo and Mitsui.

A Sumitomo spokesperson said: "We are holding internal discussions on what actions are needed to take".

TransContainer's Baskakov said Rusal is considering redirecting its exports to other markets that are less sensitive to the sanctions risk, and while it works through that process had suspended pending shipments.

The price for alumina, a key ingredient for making aluminium, has surged to an all-time high above $700 (€565) a tonne following U.S. sanctions against producer Rusal, which owns Europe's largest refinery.


Its near 12 per cent gain for the week was still the biggest since the contract was launched in its current form in 1987, according to Reuters data.

SHANGHAI ALUMINIUM: On the Shanghai Futures Exchange, the most-traded June aluminium contract closed 0.5 percent higher at 14,930 yuan ($2,376) a tonne, just below a almost three-month high reached on Tuesday.

Rio Tinto also said it was reviewing Rusal's 20 percent stake in the Queensland Alumina refinery, Rusal's supply and offtake arrangements, bauxite sales to Rusal's refinery in Ireland and offtake contracts for alumina.

But it said adjustments may be made as a effect of the United States sanctions, announced on April 13.

"Everyone has been on a search for substitutes and that pushed local spot premiums to around $200-$250 per ton by last Friday", he said. It is an nearly overnight material drop in supply, supply that is of non-sanction affected material.

Australia, the Middle East, Malaysia and India are all viable alternative sources for metal.

Russian aluminium producer Rusal is Rio Tinto's 20% partner in the Queensland Alumina refinery and the Rio has already said it would declare force majeure on certain bauxite contracts because of sanctions created to punish Moscow for actions that include meddling in the 2016 presidential election.

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