Aluminium ‘mating season’ starts with lower price expectations; Rusal optimistic of winning back its customers

The most waited ‘mating season’ for aluminium industry starts as aluminium producers are starting the first round of autumn negotiations with the consumers around the world. Rusal, a leading aluminium producer has been looking forward to the season as this will be their first new negotiations after the sanctions were lifted in January 2019, which disrupted its business last year.

According to Reuters Rusal is in talks with customers to agree 2020 supply contracts and is optimistic about winning back its lost customers.

“Sanctions are over. No one is talking about sanctions, nobody... There’s no threat of that,” said one of Rusal’s largest clients, when asked if they would take into account any associated risks when discussing next year’s contract.

Because of the falling LME price and weak demand conditions around the market, Rusal and other aluminium producers are under pressure to cut prices for 2020 contacts.

Rusal has not made any official statement on the matter.

According to sources the mating season has just started and very few contracts have been signed so far. The aluminium market is well supplied and potential customers are expecting a good price. Sources said they are also trying to use Rusal’s sanctions experience “as leverage”.

Benchmark three months aluminium prices on the London Metal Exchange at around $1,719, are at their lowest since January 2017.

Rusal is focusing on its value-added products (VAP) sale to boost earning but weaker demand has created a concern and already caused a 38% drop in the company’s first-half net profit. The company is also looking at by-passing traders and going straight to end-users.

The trader said his firm had not been offered a discount by Rusal to reflect any sanction advantage and their prices are at per with the competitors. Even during the sanctioned period, customers, who were already in a contract with Rusal, were allowed to fulfil those contacts. So, most of the buyers are not concerned about the sanction history of Rusal.