Oleg Deripaska cries with aluminum tears

UC Rusal almost halved exports of aluminum due to sanctions. After getting into the sanction list, Oleg Deripaska's company found itself in international isolation.
In April of this year, aluminum exports from Russia amounted to 172,000 tons, according to the Federal Customs Service (FCS). This is 45.6% less than in March: then exports amounted to 316 000 tonnes. In monetary terms, exports in April decreased by 47.7% to $ 325.9 million. The FCS in its statistics takes into account the export of both primary aluminum and alloys out of him.

In Russia there is only one aluminum producer - UC Rusal. The company last year produced 3.7 million tonnes of aluminum, follows from its presentation of financial results for the fourth quarter of last year. 97% fell on Russia.

UC Rusal in 2017 sold 3.9 million tons of metal, with 82% of production - to countries far abroad.

On April 6, the US Treasury imposed sanctions against Oleg Deripaska and his eight companies, including UC Rusal. American residents are prohibited from doing business with sub-investment companies, as well as owning their securities. The prohibition does not apply to non-residents of the United States, but they can themselves be sanctioned for material transactions with such companies.

 Therefore, in April, many foreign companies began to refuse cooperation with UC Rusal one by one. UC Rusal was warned by the Swiss trader Glencore about the risks of non-fulfillment of contracts for the supply of metal. Reuters reported with reference to its sources that Japanese commodity traders had asked UC Rusal to stop shipment of aluminum and other products. Aluminum of the Russian company stopped trading in the London Metal Exchange and the New Nork Commodity Exchange on metals - Comex.

How much aluminum production has changed at the enterprises of UC Rusal is unknown. The company itself has not published such statistics yet. Sources Vedomosti said in April that in a situation of a sharp reduction in foreign demand, UC Rusal has decided not yet to reduce production, and work in the warehouse. A representative of UC Rusal did not answer Vedomosti's questions.

Initially, the US Treasury gave international contractors UC Rusal two months to complete cooperation with the company, which fell under the sanctions. This led to a panic in the market - aluminum prices soared 24% to three-year highs. On April 18, 1 ton of aluminum was worth $ 2537 on the London Metal Exchange.

Later, US authorities announced that sanctions could be lifted if Deripaska refused to monitor the companies that were on the list, and also extended the deadlines for counterparties to terminate cooperation with UC Rusal and other structures of the businessman who were under sanctions until October 23.

The fall in export supplies in April is a logical market reaction to sanctions, says Maxim Khudalov, an analyst with ACRA. The US Treasury gave contractors two months to complete work with UC Rusal - during this time it is impossible to make a deal with the metal, he points out. The physical delivery of metal from the London Metal Exchange warehouses can last up to a year. "To enter a deal without understanding whether you can close it or not and whether you will have physical metal as a result - suicide for industrial companies," the expert says. According to Khudalov, in May, on the contrary, it is expected to increase export supplies. "The US extended the deadline for the termination of deals until October 23, the market calmed down a little - during this time it is possible to understand how to work in the new conditions," he explains. The foremost task for traders and for aluminum consumers now is to stock them up so that at the end of October metal prices do not rise and there is no shortage in the market, Khudalov emphasizes.