UC Rusal increased exports of aluminum

Consumers buy metal in store for fear of the start of sanctions against the company.
From January to August 2018, exports of aluminum from Russia increased by 14.8% from last year to 2.12 million tons, according to the Federal Customs Service. The only metal producer in Russia is UC Rusal.

At the same time, during the three summer months, deliveries abroad grew steadily. In June, 272,000 tons of aluminum were exported, in August - by 35.7% more, 423,300 tons. Compared to August last year, shipments increased by 45.9%.

The representative of UC Rusal declined to comment. A source close to the company explained that these statistics are not representative, since the real export in it can be reflected with a significant delay.

Consumers are seeking to buy metal for the future, says Maxim Khudalov, director of the ACRA corporate rating group. Everyone fears that there will not be another delay for UC Rusal, and on November 12, the US sanctions will come into force. If this happens, chaos will begin again in the aluminum market, he believes: "Prices will soar, the metal will be in short supply." According to the expert, American consumers of aluminum UC Rusal are not trying to start production of this metal in the country, but to find new channels for acquiring metal through intermediaries and bypassing sanctions. Own aluminum production in the United States in 2017 amounted to 740,000 tons, cites US Geological Survey data. At the same time, the capacity for the production of this metal in the country is estimated at 2 million tons. That is, they are only 37% loaded.

From the US Geological Survey data for July 2018, for example, it follows that the United States increased aluminum imports from the UK and Turkey by 69.5 and 33.1%, respectively. According to Khudalov, most likely, aluminum from other suppliers, including UC Rusal, passes through these countries, since these countries do not have their own potential for substantial production growth. Aluminum imports from Russia in July 2018 compared to July last year decreased by almost 2 times: from 440,000 to 265,000 tons, follows from the US Geological Survey report.

UC Rusal reported that in the second quarter of 2018 (the company was included in the US sanctions list on April 6), revenue from deliveries to the markets of Europe and the CIS countries increased by 6% in each direction compared to quarter I. Supplies to the North American market declined by 7%.

Initially, the US Treasury gave UC Rusal counterparties two months to complete cooperation with the company. This led to a panic in the market - aluminum prices soared by 24% to three-year highs. On April 18, 1 ton of aluminum cost $ 2537 on the London Metal Exchange.

Later, the US authorities announced that the sanctions against UC Rusal and En + controlling it could be lifted if Deripaska gives up control of them. Also, for contractors, the terms of termination of cooperation with UC Rusal were extended until October 23. In mid-September, the US Treasury gave the company another delay - this time until November 12, and also allowed the existing contracts to be extended on the same terms.

At the end of April, the chairman of the board of directors of En + (owns 48% of UC Rusal) and the independent director Lord Gregory Barker developed a plan to remove the company from the sanctions. The document was submitted to the US Treasury at the end of July. The plan stipulates that Deripaska should reduce the share of En + below the control.

Of course, there is some nervousness in the aluminum market, as no one has accurate information about what will happen after November 12, says a person working with counterparties of UC Rusal. “Of course, everyone is waiting for the next postponement and relaxation. The US Treasury has repeatedly stated that there is no goal to stop the company's factories, says the source of Vedomosti. “And if UC Rusal is deprived of export supplies, the power will have to be stopped sooner or later.” The growth of exports in the eight months of 2018, he connects with the fact that metal consumers seek to provide themselves with raw materials in advance. UC Rusal could also try to make the most of the currently available export options.