US lifts Rusal sanctions; aluminium prices fall; supply to increase

The US government’s widely expected decision late Sunday to lift sanctions on Russia’s UC Rusal, one of the world’s biggest primary aluminum producers, led to a noticeable fall in the LME primary aluminum price.

Traders are pointing to the possibility of bigger falls in future, as it is unclear how quickly material stockpiled at Rusal — understood to be mainly billets and alloy products — is likely to come back onto the market.

The lifting of sanctions by the US Office of Foreign Assets Control (OFAC), expected for several days, was understood to have been slightly delayed by the US government shutdown, which was partially suspended late Friday.

OFAC on December 19 had sent a notice advising Congress of its intent to terminate the nine-month old sanctions against Rusal and two other companies previously owned by sanctioned individual Oleg Deripaska, within 30 days.

The lifting of sanctions was greeted favourably by the European Union Aluminum Federation. “We are relieved that the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) responded to the European aluminium industry’s concerns that permanent sanctions on Rusal would disrupt the entire value chain, impacting the viability of our industry, employment, and the end-users of our permanent material,” according to Gerd Gotz, European Aluminium’s director general.

“The lifting of the sanctions is a positive first step in stabilising aluminium trade flows, but the volatility caused by the unsustainable increase of Chinese overcapacity and the US aluminium tariffs, which are a bilateral response to this global challenge, still needs to be addressed,” Gotz said in a press statement.

Commerzbank noted in its daily commodities reports that the sanctions, which had been in force since last April, “had long kept the market on tenterhooks — with repeated concerns about supply bottlenecks.” Analysts at the bank noted that the Russian producer accounts for nearly 6.5% of the world’s aluminum production, meaning that “more material is likely to be available to the market again — probably even in the near future because the company has in recent months been transporting material from its smelters in Siberia to the country’s ports so that it can be shipped quickly once the sanctions are lifted.”

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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