Stocks of Rusal collapse 50% after USA sanctions

Howard TerryApr 12, 2018

Firms controlled by Russian billionaire Oleg Deripaska have seen their shares nose-dive on stock markets in the wake of USA sanctions, according to reports.

Shares in Rusal, an aluminium company controlled by Deripaska, almost halved on the Hong Kong stock exchange on Monday, according to the BBC.

The sanctions imposed on Rusal and its main owner, metals magnate Oleg Deripaska, mark the first time a major worldwide company has been targeted by Washington in its moves to punish Russian Federation for alleged meddling in the 2016 USA election.

Although the supply pipeline of the metal, more than two-fifths of which is sourced in Russian Federation, has not been directly hit by the sanctions, the market has been rattled by the inclusion of Deripaska on the blacklist.

They follow a diplomatic crisis sparked by the poisoning of former spy Sergei Skripal in Salisbury.

The U.S. Treasury on April 6 announced sanctions against seven Russian oligarchs and 12 companies they own or control, saying they were profiting from a Russian state engaged in "malign activities" around the world.

The Kremlin on Monday slammed the latest round of sanctions.

Moody's said it was withdrawing all ratings for Rusal due to its own business reasons.

"In our view, there are no such risks now and certainly no need to take systemic measures, but we will keep track of the situation", Elvira Nabiullina said.

The action targeted Russian oligarchs whose companies have wide-ranging involvement in worldwide capital markets.

Rusal's dollar bonds slumped to record lows, two major customers said they were reviewing their contracts, and the London Metal Exchange distanced itself from the aluminum giant on Tuesday, in the latest aftershocks from USA sanctions.

The company said the sanctions were likely to have a "materially adverse" impact on its business and finances. The Russian ruble has also sold off against the US Dollar and is down 3.5% so far. In addition, the list covers the Renova Group of Vekselberg, Ladoga Management of Shamalov, the Russian Financial Corporation bank (owned by Rosoboronexport, also listed), NPV Engineering, and Rothenberg's Gazprom Bureniye. Shares in Russian steelmaker Evraz were the biggest fallers on the FTSE 100 in London, closing 14.4% lower.

Prices of the metal, vital in the aircraft manufacturing and auto industries, jumped as traders protected themselves against the chance that United Company Rusal - the biggest aluminium maker outside China - will be prevented from supplying the global commodity market.

"We will obviously do what we have to do to ensure that we comply with applicable sanctions", Alf Barrios, Rio Tinto Aluminium's chief executive, said in an interview. "Buyers are scrambling to try to replace where they can, to plug the gap left by not having Russian-origin metal", said Robin Bhar, head of metals research at Societe Generale in London.

The sanctions, the latest U.S. effort to punish Moscow for "malign activity around the globe", also affect 17 senior Russian government officials.

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