Rusal said to discuss China deals to ease sanctions crunch

By BLOOMBERG

SINGAPORE • United Co Rusal plc officials met Chinese companies and traders this week to discuss the possibility of buying alumina and selling aluminium in the Asian country as US sanctions freeze out the Russian producer from markets around the world, according to people with knowledge of the talks.

Rusal’s delegation in China, which includes senior marketing and sales representatives, is discussing potential options but hasn’t reached any sort of agreement and may not do so, according to the people, who asked not to be identified because the matter is private. Chinese officials were cautious about any sort of deal because of the risk of contravening sanctions, the people said.

Rusal is looking for alternative sources of alumina, the raw material for aluminium, as sanctions block its normal supplies. At the same time, the company’s asking traders whether it can boost sales of the refined metal in ingot form in China, as its usual customers are cut off. Rusal’s press office declined to comment.

China may not be the saviour Rusal is seeking. The world’s biggest producer has been cutting excess capacity, it’s exporting huge volumes of aluminium products it doesn’t need domestically and exchange warehouses are brimming with record stockpiles. What’s more, its own aluminium industry is being targeted by US trade tariffs.

“It’s understandable that Rusal is looking for a solution from China as the country is the world’s biggest market of the metal,” said Wan Ling, an analyst at CRU Group in Beijing. “We’ll see major concerns from the Chinese side amid the current sensitivity in the global trade environment.”

The US sanctions are upending the global supply chain for aluminium, which is used in everything from planes made by Boeing Co to Ford Motor Co trucks. Rusal is the biggest producer outside China, supplying about 6% of the world’s aluminium or about 17% of production outside China. It operates mines, smelters and refineries from Ireland to Jamaica.

Rusal’s Hong Kong traded shares, which have lost more than 60% since the sanctions were announced, rallied by more than 27% yesterday to HK$1.81 (90 sen). The company is likely to target sales in alternative markets across the Middle East, Turkey and China to make up for lost exports to western markets, Morgan Stanley analyst Susan Bates said in an emailed note.