Japanese companies stop procuring aluminium from Rusal following US sanctions: Sources

Following Glencore and Rio Tinto’s decision to declare force majeure on Russian aluminium contracts, Japanese companies have asked Russia’s united company Rusal not to ship refined aluminium and other products to them further.

On the occasion of US sanctions against world’s No. 2 aluminium producer Rusal, many Japanese buyers are also left with concerns about the limited availability of aluminium and lifting global prices by a fifth. On London Metal Exchange (LME), the aluminium price has already hit the highest in last six years, hovering at US$2400 per tonne.

"We have requested Rusal stop shipments of aluminum 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 an anonymous source at a trading house.

To name the Japanese companies who used to receive aluminium from Rusal are Mitsubishi Corp, Marubeni Corp, Sumitomo Corp and Mitsui & Co.

Many Japanese trading houses are also declining aluminium supply contract with Rusal for the same reason, reported another source with direct knowledge of the matter. But Rusal in Moscow is not ready to comment anything on this matter.  Japanese companies Mitsubishi, Marubeni and Mitsui have also declined to comment, saying they do not talk about specific commercial deals.

"We are holding internal discussions on what actions are needed to take," a Sumitomo spokesman said, adding to it, the trading house is also talking with customers about alternative supplies.

However, many other Japanese buyers, including fabricators, are considering to give a thought to how to deal with the sanctions on Rusal in the best possible way, since Japan buys about 300,000 tonnes of refined aluminium from Russia, which is 16 per cent of the nation’s total import, according to the Japan Aluminium Association.

"Rusal asked us to halt payments soon after the U.S. sanctions were announced as they can't access U.S. dollar accounts," a source at a Japanese fabricator said.

The Russian smelters are also trying to find an alternative means of settlement to continue their businesses with Japan, said the source.

"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, which is notably higher than Japan term premiums for April to June quarter shipments at US$129 per tonne.

However, many others feel that Japan would be able to find replacements for sourcing refined aluminium, may be from Australia, Middle East, Malaysia and India, although securing alternatives for specialised value-added products would be harder.