A worker supervises as a large aluminum slab is moved by overhead crane in the foundry at the Krasnoyarsk aluminum smelter, operated by United Co. Rusal, in Krasnoyarsk, Russia (Photographer: Andrey Rudakov/Bloomberg)  

Deripaska's Rusal Roiled by Sanctions as Aluminum Prices Jump

(Bloomberg) -- The giant aluminum producer owned by Russian billionaire Oleg Deripaska plunged 50 percent in Hong Kong trading after U.S. sanctions cast doubt on the future of the company’s banking and trading relationships.

Prices of the metal, vital for the aircraft manufacturing and the auto industries, jumped as traders protected themselves against the chance United Co. Rusal -- the biggest aluminum maker outside China -- will be prevented from supplying the global commodity market.

“This does warrant a little bit of panic buying by traders -- the risk is large enough and real enough to buy on the back of insecurity of supply,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd.

Rusal and seven other Deripaska-linked firms were the most prominent targets in a list of 12 Russian companies the U.S. hit with sanctions on Friday intended to punish the country for actions in Crimea, Ukraine and Syria, and attempting to subvert Western democracies. The sanctions -- designed to make it almost impossible Deripaska’s empire to do business in U.S. dollars -- pose a grave threat to an oligarch who’s been seen as one of President Vladimir Putin’s closest allies.

Deripaska's Rusal Roiled by Sanctions as Aluminum Prices Jump

The stock fell 50 percent to HK$2.32 on Monday, according to pricing from the Hong Kong Exchanges & Clearing Ltd. website. Shares dropped about 47 percent in Moscow before recovering about half the drop.

Aluminum prices jumped as much as 4 percent to $2,124 a metric ton on the London Metal Exchange, extending a 1.6 percent gain in the previous session.

Deripaska's Rusal Roiled by Sanctions as Aluminum Prices Jump

The sanctions may result in technical defaults on some credit obligations and be “materially adverse to the business and prospects of the group,” Rusal said in a statement Monday, adding its annual report may also be delayed. “The company’s primary focus remains its business and, most importantly, all of its global customers, investors and partners.”

The U.S. actions target Russian oligarchs whose companies have wide-ranging involvement in international capital markets. Deripaska called the reasons “groundless, ridiculous and absurd.”

The Foreign Ministry is working on a response, spokeswoman Maria Zakharova said on a state television channel, according to state news agency Tass. “We have a whole list of possible measures that are being studied.”

Deripaska's Rusal Roiled by Sanctions as Aluminum Prices Jump

The move also raises questions for Glencore Plc and its billionaire chief Ivan Glasenberg. The commodity giant is one of Rusal’s top shareholders and the biggest buyer of its metal, while Glasenberg sits on the board.

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