Russian aluminum manufacturer United Co. Rusal. fell about 40 percent, while metal prices rose, after US sanctions on the company and its billionaire owner Oleg Deripaska led the producer to warn of possible defaults and "materially adverse" consequences.
Shares fell to HK $ 2.81 on Monday, according to prices from the Hong Kong Exchanges & Clearing Ltd. website. Aluminum prices rose up to 2.5 percent to $ 2,092 per metric ton on the London Metal Exchange, extending a gain of 1.6 percent in the previous session, as investors bet on supply disruptions.
The United States Treasury on Friday included Rusal and seven other firms linked to Deripaska on a list of 12 Russian companies affected by sanctions that they said were intended to punish the country for actions in Crimea, Ukraine and Syria, and try to subvert Western democracies. The company, also included in Moscow, is the largest aluminum manufacturer outside of China, and the measures could hurt access to financial markets and disrupt shipments to global buyers.
"This justifies a bit of panic on the part of the merchants: the risk is big enough and real enough to buy from the insecurity of the supply," said Daniel Hynes, chief commodity strategist for Australia and New Zealand Banking Group Ltd. "Rusal's export earnings are substantial and we have to put some doubt on that supply, increase the supply risk premium".
The sanctions may lead to technical breaches in some credit obligations and "materially adverse to the business and the group's prospects," Rusal said Monday and added that his annual report could also be delayed. "The company's main focus is still its business and, most importantly, all of its customers, investors and global partners, and the company will continue to ensure that it complies with all applicable laws and regulations." Rusal represents approximately 17 percent of the offer outside of China, according to the Port Intelligence.
US actions directly target Russian oligarchs whose companies have extensive involvement in international capital markets. The Russian Ministry of Foreign Affairs is working on measures to respond to the sanctions, said ministry spokeswoman Maria Zakharova on a state television channel, according to state news agency Tbad. "We have a full list of possible measures that are being studied," Tbad said, quoting Zakharova.
The measure also raises some questions for Glencore Plc and his billionaire boss Ivan Glasenberg. The commodities giant is one of Rusal's main shareholders and Glasenberg belongs to the company's board, while the company is also Rusal's biggest buyer of metal.
Aluminum, used in everything from airplanes to beer cans, has lost 8 percent of the LME this year due to concerns over increased shipments from China, where producers could benefit by filling the supply gap left by Rusal.
– With the badistance of Martin Ritchie