A worker operates a mixer of fused aluminium at the foundry shop of the Rusal Sayanogorsk aluminium smelter outside the town of Sayanogorsk in Russia.   File photo: REUTERS
A worker operates a mixer of fused aluminium at the foundry shop of the Rusal Sayanogorsk aluminium smelter outside the town of Sayanogorsk in Russia. File photo: REUTERS

Melbourne — Rio Tinto will be among the biggest winners from the US sanctions imposed on Russian aluminium giant United Company Rusal as the penalties shake up the global metals trade and boost costs for US consumers, industry sources said on Monday.

On Friday the US imposed the sanctions against businessmen, companies and government officials that are considered associates of Russian President Vladimir Putin in one of Washington’s most aggressive moves to punish Moscow for a range of activities.

Rusal, the world’s second-largest aluminium producer, and its former president Oleg Deripaska were included on the list.

Rusal said the sanctions "may be materially adverse to the business and prospects of the group".

Shares plunged 50% in Hong Kong on Monday.

Traders and analysts said the sanctions would accelerate a rerouting of global aluminium shipments that began last month after the US imposed a 10% duty on aluminium imports under the so-called "Section 232" of US trade laws.

"It probably reroutes a lot of the trade flows," said analyst Daniel Morgan at UBS in Sydney. "It is beneficial, if you are a producer that is [compliant with the section 232 tariff] because you’ve got an ability to sell into the US and other markets."

After US President Donald Trump announced the tariffs, he later exempted the EU and other trading partners, including Canada and Australia until May.

The new sanctions on Rusal would disrupt unwrought Russian aluminium imports, which in 2017 were 695,778 tonnes out of a total of about 5-million tonnes, according to the International Trade Centre (ITC).

Rio Tinto would be well placed to replace that metal with any unsold metal if the sanctions stuck, said Paul Adkins, MD of consultancy AZ China.

Rio Tinto declined to comment.

The company produced 3.6-million tonnes of aluminium last year from its operations, including in Canada and Australia, which are exempted from the section 232 tariff.

"All this does is make things more expensive for Americans," said one aluminium trader in Singapore. "Everyone who has a duty-free exemption is laughing."

US aluminium premiums traded at 18.4c a pound, or about $405 a tonne on top of futures prices. Those premiums are expected to climb.

"Overall, it should be near-term bullish for the premium and price," said another physical metal trader in Singapore.

Rising premiums could draw more Chinese aluminium to the US since the additional cost of the section 232 tariff is less than the US premium, said AZ China’s Adkins.

A source at a Japanese aluminium fabricator said his company did not plan to change its supply contract with Rusal since it buys not only refined aluminium but also semi-customised products and cannot find easy substitutes.

However, if its customers, such as carmakers, decide to follow the US sanctions, then the company might have to think twice about buying metal from Rusal, he said.

Reuters

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