Steam rises from olten aluminum as it cools inside ingot molds at the Alumetal Group Hungary Kft. aluminium processing plant in Komarom, Hungary. (Photographer: Akos Stiller/Bloomberg)

Aluminum Posts Biggest Rally Since ‘09 as Rusal’s Rivals Surge

(Bloomberg) -- Aluminum posted the biggest five-day gain since 2009 on fears of supply disruptions after United Co. Rusal was hit by U.S. sanctions. Rusal’s shares fell, while other producers climbed on optimism they will benefit from the company’s woes.

The metal rose 2.9 percent to settle at $2,201 a metric ton at 5:51 p.m. in London, after surging 8.1 percent in four days. Shares of the Russian firm owned by billionaire Oleg Deripaska dropped in Hong Kong after losing half their value Monday, as some commodity traders are said to have stopped buying metal from the company.

Aluminum Posts Biggest Rally Since ‘09 as Rusal’s Rivals Surge

“If Rusal can still sell to Europe, then maybe it wouldn’t matter too much, but if both Europe and the U.S. are out of bounds, it would be challenging,” said Zhu Yi, an analyst at Bloomberg Intelligence. “If there’s widespread disruption to Rusal’s exports, it will tighten supplies. That would create a supply deficit in the world, and other producers would have to ramp up to fill that.”

On Tuesday, the London Metal Exchange said it won’t allow deliveries of United Co. Rusal aluminum produced after the U.S. announced sanctions on April 6, further dimming the global supply prospects.

China supplies more than half the world’s aluminum, and companies there are among potential winners from the sanctions. China Hongqiao Group and Aluminum Corp. of China Ltd., the country’s top suppliers, have risen at least 7 percent this week. Alcoa Corp. and Century Aluminum Co. also jumped on Monday and Tuesday.

Aluminum Posts Biggest Rally Since ‘09 as Rusal’s Rivals Surge

Companies like Rio Tinto Group and Alcoa could benefit the most among those outside Asia because the two markets potentially most affected are the U.S. and Europe, said Wan Ling, an analyst at CRU Group in Beijing. With the sanctions coming so quickly on the heels of U.S. import tariffs, Wan said she had some concerns over where the U.S. can source the metal it needs.

“There will be a huge deficit of primary aluminum in the U.S., at least in the very short term,” Wan said. “In the longer term, there could be a response from smelting capacity in the U.S., and downstream they will try to source semi-finished aluminum from South Korea or from other non-China countries.”

Aluminum Posts Biggest Rally Since ‘09 as Rusal’s Rivals Surge

Glencore Plc said the U.S. sanctions against Deripaska mean it won’t proceed with a plan to swap its stake in Rusal for shares in another of his companies, and that chief Ivan Glasenberg has resigned from Rusal’s board. The Swiss-based commodities giant said it was evaluating other contracts with Rusal, including deals to buy aluminum and alumina.

Even after rising this week, aluminum is still down 3 percent in 2018 after surging stockpiles in China and U.S. import tariffs damped the optimism that made it the top-performing base metal last year.

Other contracts gained on the London Metal Exchange on Tuesday including copper, zinc, nickel and lead. Tin declined.

©2018 Bloomberg L.P.