Rusal May Lose Aluminum Sales From Arconic, Ball in Russia

(Bloomberg) -- Russia’s United Co. Rusal stands to lose aluminum sales not only in overseas markets, but also at home.

That’s because American manufacturing companies Arconic Inc. and Ball Corp. have a major presence in Russia, controlling more than a quarter of the country’s aluminum usage. The companies, which make everything from car parts to beverage cans, will be unable to buy from Rusal, which was placed under U.S. sanctions two weeks ago.

The end of a large part of Rusal’s domestic business would pose a major problem for the company, which sells 20 percent of its aluminum in Russia. It’s also an issue for the Russian government, which has previously said it will develop local manufacturing, Kirill Chuyko, an analyst at BCS Global Markets, said by phone.

The American plants may have to switch to imported material, he said. Another option is that the companies could get a U.S. Treasury license to keep buying aluminum from Rusal, according to Chuyko. He added that if there’s no solution, the U.S. companies would need to sell the Russian plants.

The American plants may face losses and it would be hard to find a quick buyer for the businesses, Chuyko said. Russia is also weighing new legislation, which would allow criminal prosecution for companies in Russia that obey U.S. sanctions, Interfax reported, citing Vyacheslav Volodin, a speaker at the State Duma, the lower parliament chamber.

Ball said the company is "monitoring the situation about sanctions on Russia very closely." Rusal, Arconic and Russia’s Industry and Trade Ministry declined to comment.

Arconic, Ball

Arconic and Ball run four plants in Russia that buy more than 200,000 metric tons of aluminum from Rusal per year, said two people familiar with matter, who asked not to be identified because the information is not public.

Arconic’s plant in Samara, a city in southwestern Russia, produces aerospace and automotive products and employs about 3,000 people. In 2017, revenue from Russia was $500 million, according to the latest financial report. The factory was owned by Rusal until 2004, when it was sold to the company, then part of Alcoa.

Ball has three plants producing aluminum cans in Russia. Some of the sites were also purchased from Rusal in 2007 by Rexam, which is now part of Ball.

©2018 Bloomberg L.P.