Rusal Extends Worst Week on Record Amid Uncertainty Over Future

(Bloomberg) -- United Co. Rusal’s unprecedented rout continued into a second week amid uncertainty over the Russian aluminum producer’s future following U.S. sanctions that have frozen its metal out of western markets.

The company, controlled by Russian billionaire Oleg Deripaska, slumped 30 percent to HK$1.42 in Hong Kong after losing more than half its value last week. The U.S. sanctions imposed on April 6 have sent shock waves through the global metals market as buyers, traders and suppliers sought to cut ties to Rusal, the largest aluminum producer outside China.

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. Rusal’s blacklisting has caused aluminum to surge as buyers hunt for other sources of the metal. Prices jumped by a record on the London Metal Exchange last week and are trading near a six-year high.

“In the event sanctions are maintained, there could be longer-term implications for the market,” Bates said.

Finance Minister Anton Siluanov last week said Russia may provide short-term liquidity support to Rusal, which employs almost 60,000 people and accounts for about 16 percent of the country’s export earnings.

There’s also the threat of more sanctions on Russia. Fresh penalties will be imposed related to Syria’s reported use of chemical weapons as the U.S. and U.K. assess the next steps after Friday night’s strike on the Middle Eastern country, U.S. Ambassador to the United Nations Nikki Haley said.

To contact the reporter on this story: Mark Burton in London at mburton51@bloomberg.net.

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin, Liezel Hill

©2018 Bloomberg L.P.