After two weeks of convulsions caused by US sanctions against United Co. Rusal, the metal market was in for more chaos: many traders bet the Russian aluminum giant was only days away from closing the plants Sweden removes Jamaica
On Monday morning, the US Treasury threw a potential lifeline, making it clear that it is not pushing for the collapse of the company.
"The US government does not target the hard-working people who depend on Rusal and its affiliates." Secretary Steven Mnuchin said:
The Ministry of Finance has loosened its position in three ways: Mnuchin said it was considering a request to lift sanctions on the company; it extended the period in which companies continue to trade with Rusal for nearly five months It could clarify exactly which businesses were allowed during that time.
The price of aluminum plunged by 8 percent on the London Metal Exchange in minutes.
The speed of the reaction showed how far sanctions hit the aluminum market As the largest metal supplier outside of China, Rusal was excluded from international markets and the impact began to be felt throughout the industry: traders stopped buying Rusal's metal and shipowners refused Mining their products and miners could not deliver their equipment Raw materials
Well, some of these things could be possible – at least for a few months.
"The market clearly takes the light at the end of the tunnel for Rusal," said Oliver Nugent, a metal analyst at the Dutch bank ING Groep NV
It is not clear if the steps of the Treasury On Monday international companies will allow to resume their business with Rusal. Mining Companies Rio Tinto Plc and Glencore Plc have already stated force majeure on some contracts, while many traders, banks and shipping companies have frozen all dealings with the Russian company.
Read a QuickTake on US sanctions on Russia, click here.
Nevertheless, some long-term contracting parties may now be able to resume trading with Rusal under these contracts between now and October 23, according to the persons familiar with the matter and asked not to be named discussion of Internal Consultations
"Rusal's business with major Western companies is stalled," said Maximilian Hess, senior political risk analyst at AKE International. "With this extension until October, some supply contracts can be concluded."
In particular, the clarification of the attitude of the Ministry of Finance on the business of international companies with Rusal in the next six months solved some important issues Counterparties are unaware of the continuing business.
For example, the Treasury Department said in an updated " Frequently Asked Questions" that non-US companies would not receive any sanctions for transactions related to the reduction of contracts with Rusal during this period until October 23, and that payments related to such transactions would not have to be paid into a blocked account.
This could help buyers, suppliers and shipping companies that have contracts with Rusal.
This is important because the sanctions have frozen all trade flows – most critical in the market for alumina, the raw material from which finished aluminum is made. Rusal is a key factor in a global interconnected supply chain that has been thrown into chaos. For example, Rusal's Aughinish clay plant in Ireland buys bauxite, which is sold by mines in Guinea, Rio, to smelters across Europe.
"It's the clay market that needs to go through this perfect storm," said Nugent. "If that gives the commodity market a breathing space, it justifies today's part of today's weakness," he said. Nonetheless, traders, while Treasury movements on Monday are creating some recovery for Rusal, are likely to do so cautiously. The license that allows companies to continue to transact applies only to existing contracts, not new ones, and it is not clear whether companies that have already transacted with Rusal may restart.
"If I were an employee of the Aughinish factory, I see that as better news, but the storm is still there," Hess said.
In the long run, the US has put the resolution of the sanctions in Moscow's hands and said they would drop the curbs of Rusal if the billionaire Oleg Deripaska sold his share and passed control.
It is not yet clear whether the Russian government will provide a solution to this problem.
"If it turns out that the sanctions will not stop the plant workers or workers from salaries and sales, then Deripaska suits the government as the owner," said Andrei Margolin, an economist at the President's Academy of National Economy and Public Administration in Moscow 9659003 ] – With the support of Ilya Arkhipov and Thomas Biesheuvel