Rusal Said to Discuss China Deals to Ease Sanctions Crunch

(Bloomberg) -- United Co. Rusal officials met Chinese companies and traders this week to discuss the possibility of buying alumina and selling aluminum in the Asian country as U.S. sanctions freeze out the Russian producer from markets around the world, according to people with knowledge of the talks.

Rusal is looking for alternative sources of alumina, the raw material for aluminum, as sanctions block its normal supplies, according to the people, who asked not to be identified because the matter is private. At the same time, the Russian company is asking traders whether it can boost sales of the refined metal in ingot form in China, as its usual customers are cut off.

Rusal Said to Discuss China Deals to Ease Sanctions Crunch

Rusal’s delegation in China, which includes senior marketing and sales representatives, is discussing potential options, hasn’t reached any sort of agreement and may not do so, according to the people. The Chinese officials were cautious about any sort of deal because of the risk of contravening sanctions, the people said. Rusal’s press office declined to comment.

The U.S. sanctions are upending the global supply chain for aluminum, which is used in planes made by Boeing Co. and Ford Motor Co. trucks. Rusal is the world’s biggest producer outside China, supplying about 6 percent of the world’s aluminum. It operates mines, smelters and refineries across the world from Ireland to Jamaica.

Rusal is likely to target sales in alternative markets across the Middle East, Turkey and China to make up for lost exports to western markets, Morgan Stanley analyst Susan Bates said in an emailed note. China is the world’s biggest producer of aluminum and has been exporting increasing volumes of aluminum products that it doesn’t require domestically.

The metal surged to the highest level since 2011 on Thursday amid the global scramble for alternative supplies, trading at $2,616 a ton at 1:52 p.m. in Singapore. Goldman Sachs Group Inc. forecasts prices could surge to $3,000 a ton in the near term as the impact overwhelms the market.

Rusal’s Hong-Kong traded shares have lost more than 60 percent since the sanctions were announced. They rallied by as much as 15 percent on Thursday to HK$1.64.

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