[SMM Analysis] US sanctions against Russian aluminum giant international aluminum ingot supply will be redistributed?

SMM, April 9: with U. S. sanctions against aluminum giant Rusal (Rusal), the trade war has made the market sensitive to aluminum prices.

Rusal's shares fell 31 percent in Hong Kong on Monday after being targeted by the United States.

"the market is concerned that US sanctions on Rusal and its own technical default assessment could lead to a shortage of aluminium and alumina supplies," Argonaut, a Hong Kong broker, said in a report.

Rusal produced about 3.7 million tonnes of aluminium in 2017, or about 7 per cent of global production, according to Argonaut. At the same time, the company produces 11.5 million tons of alumina a year, accounting for about 7 per cent of global production, while bauxite accounts for about 4 per cent of the world's production. The rise in aluminium prices is expected to expand further.

Liu Xiaolei, a senior analyst at SMM, said US sanctions against Rusal would not cause a global supply shortage for the time being, but the availability of aluminum ingots from other sources was a question for local companies. Us domestic demand for raw materials is at risk of tight supply, and such sanctions could lead to a redistribution of international supply of aluminium ingots, giving a clear boost to aluminium prices in North America, particularly local spot water. From the LME's point of view, such sanctions will create short-term spot tight expectations in the North American market, forcing some short positions to close safe haven, quite high aluminum prices.

As to whether Rusal's annual production will be hit, Liu Xiaolei pointed out that it is too early to force production cuts, through traders to carry out exchange transactions, may circumvent the effect of this sanctions.