Rusal's shares fall and LME surges on US sanctions of Mr Deripaska; LME to continue with Rusal listing

The Trump administration imposed punitive sanctions on Friday April 7, which includes seven Russian oligarchs, 12 companies they own or control, as well as 17 senior Russian government officials. The sanctions are an extension of US sanctions passed in response to Russia’s 2014 invasion of Crimea, and were called for under a law passed by Congress last year.

The U.S. government included Russian magnate Oleg Deripaska and his aluminium company Rusal on its sanctions blacklist.  This is expected to have a strong impact around the world because his business empire has a global footprint and counts major multinationals as partners. Acording to U.S. administration, Mr Deripaska and eight of his companies were placed under sanctions as they were “benefit[ing] from the Putin regime and play[ing] a key role in advancing Russia’s malign activities.”

After the announcement when US sanctioned and froze Oleg Deripaska's assets subject to US jurisdiction, aluminium prices on the London Metal Exchange gained by 2.2% at the close on Friday April 6. Rusal, the leading aluminium producers and supplier of about ten per cent of total US aluminium import has a significant role to play in the global aluminium market.

According to a Metal Bulletin update, the three-month aluminium price closed at $2,042 per tonne, its highest since before the Easter holidays. We expect the LME prices to hover around US$ 2100 per tonne on Monday. The metal has kept climbing since 5pm, recently trading around $2,061 per tonne. 

“[Aluminium made] a late charge to $2,055 per tonne area following news of additional US Russia sanctions against Putin-supporting Oligarchs, targeting the energy and metals sector with Oleg Deripaska/Rusal included,” Sucden Financial said.

Shares in Russian aluminium producer Rusal fell by more than 12 per cent on the Moscow exchange after the announcement on Friday. Shares in EN+, Mr Deripaska’s holding company fell 20 per cent.

“RUSAL is aware of its inclusion in the OFAC’s SDN List. The company regrets this development and is currently analysing the situation with its legal advisors,” Rusal said in a statement.

In another update, the London Metal Exchange said it won’t remove aluminium from Russian producer Rusal from its exchange following the US sanctions announcement.

According to LME, “it is for individual stakeholders on the LME to determine if particular brands are acceptable for their use given their legal or regulatory framework.”  “The LME does not believe that today’s announcements change that structure and as such, is not proposing to make any immediate changes,” the exchange said in a statement.

“It will, however, continue to work closely with its core market and monitor the situation on an ongoing basis.”

The sanctions have created fear among aluminium traders that they might not be able to buy or trade metal from Rusal. Rusal sells the largest part of its aluminium to Glencore under a multi-year offtake contract that would expire this year. The US premium or the surcharge to buy physical aluminium jumped to its highest level since 2015.