Commodity prices fall on softened Treasury message on Russia's Rusal

Apr 24, 2018, 10:37
Commodity prices fall on softened Treasury message on Russia's Rusal

The US Treasury also said that if Russian oligarch Oleg Deripaska sold the company, it could "provide sanctions relief".

ALUMINUM FOILED: The Treasury Department extended a deadline for US companies to stop doing business with Rusal, and also said it could change its stance on sanctions against the company if billionaire businessman Oleg Deripaska gives up control.

Shares in Rusal, one of the world's largest aluminum companies, rose 13 percent on the Moscow Exchange after the announcement.

Aluminum stocks are plunging after the United States said it would consider relaxing sanctions against a Russian company.

"It's very hard for mining companies to react to the tweetstorm", said Gallagher, referring to short-lived moves in spot prices based on fears about U.S. trade policies, amid U.S. President Donald Trump's pronouncements on social media.

Deripaska is among seven Russian oligarchs sanctioned as part of a larger action targeting Moscow's "malign activities" around the world. Aluminium prices on the London Metal Exchange, which had been up more than 3% in morning trading, rapidly reversed course to trade down more than 6% - a 10% overall movement after a 30% surge since earlier this month when the sanctions were first announced.

Last week, a German lobby for metal companies warned that sanctions against Russia's top aluminum producer are likely to hit European vehicle production since RUSAL owns an aluminum refinery in Ireland, which is crucial for the auto industry on the continent.

The drop in aluminum prices on Monday also prompted a selloff in other commodity markets as optimism seems to be spreading that the USA isn't likely to impose further sanctions on Russia's metals and energy companies. Washington blacklisted the company and its billionaire major shareholder Oleg Deripaska for suspected meddling in the 2016 US election and other alleged "malign activity".

Rusal declined to comment.

Mnuchin said "impact on our partners and allies" factored into the reprieve. Even if sanctions are not ultimately lifted, buyers also have more time to seek other suppliers.

Currently, approximately 40 percent of palladium supply comes from Russian Federation, mostly as a by-product from nickel-mining activities.

The announcement has pushed the Aluminum price lower and Rusal share price higher.

Edward Meir, an analyst at INTL FCStone, told Reuters that Rusal now has a better chance to survive and that "the 5 million tons of Rusal production that a week ago was arguably radioactive, will no longer be so".

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