US Treasury extends wind-down period for aluminum producer Rusal

Jeannie Matthews
April 24, 2018

Prices of aluminum have soared by more than 30 percent since the United States sanctions announcement.

The Treasury Department said in its updated frequently asked questions section that OFAC could consider further sanctions relief for Rusal under certain circumstances, particularly if Oleg Deripaska gives up control of the country.

"Rusal has approached us to petition for delisting", Mnuchin said.

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.

Workers walk past the company's train as they return from the afternoon shift at a factory owned by Russian aluminium producer Rusal, in Sayanogorsk, in Southern Siberia, Russia April 19, 2018.

The US treasury said if Kremlin-linked billionaire Oleg Deripaska sold his stake in the company, the world's second largest aluminium producer by output, it could cut or lift the sanctions.

Palladium took a major hit on Monday (April 23) following news that the U.S. may relieve sanctions on Russia's Rusal.

Deripaska has denounced Treasury's charges as "ridiculous" and Russian Federation has described the US sanctions a thinly veiled attack on its economy. Or so markets seem to believe: Shortly after Mnuchin's announcement Monday, global aluminum prices nose-dived. On Monday, the Treasury Department extended the sanctions' "wind down" period - a window in which US and foreign entities could complete their unfinished business with Rusal without facing any penalty - by six months, while expressing openness to lifting the sanctions entirely.

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The United States on Monday opened the door to sanctions relief for Russian aluminum producer United Company Rusal Plc, saying it was considering a company bid to avoid US sanctions and would weigh the impact on American allies and partners. Other metals prices and crude oil also retreated somewhat.

The up and down seesawing of global metals, which also occurred when nickel surged 10 per cent last week only to fall, has put many executives in the awkward spot of looking skeptical about market movement that accrues to their benefit.

Last week, aluminum hit the highest levels since mid-2011 on fears the global market could face shortages as a result of the US sanctions.

Wood Mackenzie analysts say the decision provides "much-needed breathing space" for the aluminum market, and it "expect (s) near-term correction and volatility" in prices.

Aluminium prices have gone up by nearly 30 percent over the past two weeks, and may see the automobile industry, one of the key user industries for the resource, to be impacted by the sudden spurt in prices.

Representatives for Rusal and Deripaska did not immediately respond to requests for comment.

Besides being close to the Kremlin, Deripaska was also once an associate of Trump's ex-campaign chairman Paul Manafort, a top target of U.S. Special Prosecutor Robert Mueller in his investigation of ties between Russian Federation and the Trump campaign.

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