Aluminum Prices Continue to Drop for Fifth Day as U.S. Eases Rusal Sanctions

Aluminum prices continued to fall for five consecutive trading sessions on the London Metal Exchange (LME) on Wednesday after the U.S. Treasury earlier this week eased sanctions against Russia’s Rusal – the second largest producer in the world.

As of 7:30 GMT, the cost of three-month aluminum futures on LME has dropped by 0.6%, to $2213 per ton. Since April 20, metal has declined in price by 13% already, Reuters reported.

Most other base metals also fell on a stronger dollar, which makes metals more expensive for holders of other currencies. The three-month prompt delivery London Metal Exchange (LME) contracts are now in late July and “moving toward the summer shutdown season, (so) metals could well come under further pressure and drift lower,” Malcolm Freeman, CEO of Kingdom Futures, wrote in a note.

On Monday the U.S. Treasury announced its readiness to lift sanctions against Rusal if its owner Oleg Deripaska leaves the company. This possibility was mentioned in the explanatory note of the Office of Foreign Assets Control (OFAC), posted on U.S. Treasury’s website. Thus, the U.S. authorities have sent a message that sanctions can be mitigated in case Deripaska sells his assets and completely refuses from controlling the company.

In addition, the Treasury has extended the timeframe within which other foreign companies are to terminate cooperation with the Russian aluminum producer, until October 23 of the current year.

Up to this day, it is allowed to use part of the funds from the accounts of Rusal itself or companies with his share of 50% or more that were blocked after April 6, to bankroll operations on servicing and shutter down the business.

To recap, on April 6, the U.S. Treasury introduced new sanctions against 26 Russian oligarchs and officials, including Oleg Deripaska, Igor Rotenberg, Kirill Shamalov, Viktor Vekselberg, Suleyman Kerimov, Vladimir Bogdanov and Andrei Skoch. Besides, the list featured 12 companies controlled by the businessmen.

Following this, Oleg Deripaska’s shares on the Hong Kong Stock Exchange have plummeted by roughly 40%; given a sharp drop by more than 30%, the Moscow Stock Exchange has introduced a special procedure for trading in Rusal securities. The London Stock Exchange announced the suspension of trading in depositary receipts for shares of En+.

Rusal was even compelled to declare a risk of technical default, and Deripaska himself has lost over $1.3 billion.