Aluminium spirals downward as 'worst time for Rusal has passed'

Aluminium spirals downward as 'worst time for Rusal has passed'

The Trump administration has signalled it could ease sanctions against Russian aluminium producer Rusal that have sent global metal prices skyrocketing, sparking a relief sell-off on Monday that saw aluminium fall as much as 10 per cent.

The US Treasury said it would remove the aluminium-maker from its sanctions list, if its billionaire owner, Oleg Deripaska, relinquished control.

The US sanctions list has caused uncertainty in world aluminium markets since it includes Rusal, one of the world's biggest producers of primary aluminium.

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"Rusal has felt the impact of USA sanctions because of its entanglement with Oleg Deripaska, but the United States government is not targeting the hardworking people who depend on Rusal and its subsidiaries", said Treasury Secretary Steven Mnuchin.

Further, the U.S. government may consider lifting of the ban if Rusal's major shareholder Oleg Deripaska ceded control of the company.

Rusal fell into the list of U.S. sanctions because of its involvement with Oleg Deripaska, but the United States government does not want to affect the working people who depend on Russal or its subsidiaries. Prices have given back roughly half the gains since sanctions were announced in early April.

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Countries and companies from around the world have been lobbying the U.S. government to soften the sanctions against Rusal because it was increasing clear they were causing severe disruption to global commodity markets, not only for aluminium, alumina and bauxite. In the long run, that exposure to all the commodities involved in aluminum production is a positive, Deutsche Bank analyst Chris Terry said in a Monday note hiking Alcoa's price target to 70 from 60, apparently just ahead of the Rusal news. The metal had been caught up in the sanctions row due to fears that the U.S. could target other Russian companies, including MMC Norilsk Nickel PJSC. The decision not to impose secondary sanctions particularly benefits European customers of Rusal.

Mnuchin said in his announcement that he factored the "impact on our partners and allies" into his reprieve.

The sanctions, by threatening actions against companies with U.S. units doing business with the Rusal, also spurred worries of tighter aluminum supplies on the global market, sending prices of the metal soaring.

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

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