Rusal shares plunge over 40pc on U.S. sanctions

Clay Curtis
April 12, 2018

Shares in Rusal fell by more than 50 per cent on Monday in Hong Kong, where it is listed.

As of 1200 GMT, the price of aluminium had surged 3.97 per cent to US$2,123, its biggest jump in three years.

The US sanctions could lead to other unexpected downstream effects.

At the same time, the list of companies includes several structures related to Oleg Deripaska - agroholding Kuban, Eurosibenergo, Rusal, Russian Machines and GAZ Group, investment company B-Finance, holdings Basic Element and En+.

"I think there's definitely potential for prices to pass recent peaks", Helen Lau, an analyst at Argonaut Securities Asia, said from Hong Kong. The block on Russian supplies adds to earlier import tariffs imposed by the U.S. to benefit American producers most.

Earlier it was reported that Deripaska, who joined the sanctions list, intends to discuss this situation with his lawyers. Rusal sells more than 10% of its aluminium to the US.

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Despite the turbulence at some of Russia's biggest-name companies, there may be little wider impact on the Russian economy and growth rates because Russia has already adapted to previous rounds of worldwide sanctions, said Oleg Kouzmin, the Moscow-based chief economist for Russia and ex-Soviet states at Renaissance Capital. It set the date on the view that metal warranted before then would have been produced and supplied by Rusal prior to April 6, the day sanctions were announced.

To offset the impact of the punitive measures, Rusal has triggered a contingency plan asking customers to pay in euros instead of USA dollars in a bid to skirt the sanctions, a source close to the matter said. On the New York Mercantile Exchange, palladium futures for June delivery climbed 4.2 percent to $932.50 an ounce, the biggest rally for a most-active contract in seven months.

On Tuesday, the chief executive of commodities giant Glencore, Ivan Glasenberg, left the board of Rusal, Glencore said.

Aluminium ingots are seen stored at the foundry shop of the Rusal Krasnoyarsk aluminium smelter in Krasnoyarsk, Siberia, July 27, 2016.

Jasper Lawler, head of research at London Capital Group, added: "The sanctions make it nearly impossible for these Russian firms and their billionaire owners to transact in U.S. dollars, the main currency used in worldwide trade and the standard denomination for commodities".

In LME trading on Wednesday, other base metals mostly rose, with copper up 0.2%, zinc 0.3% and nickel 1%.

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