Citing U.S. Sanctions, Japanese Trading Houses Decline Rusal Aluminium

aluminium statue

The fallout from United States sanctions upon Rusal reached producers in Japan earlier this week, as the country’s major trading houses have requested the Russian aluminium giant to cease sending aluminium to their warehouses.

According to buyers who spoke with Reuters yesterday, the situation has thrown the domestic trade for a loop, prompting firms who depend upon the trading houses as a source to frantically scour the market for replacement supplies.

The sanctions, which were imposed without warning on April 6, were aimed at seven prominent Russian businessmen and a dozen of their companies in retaliation for their alleged involvement in “malign activities” around the globe, including allegedly manipulating the United States’ 2016 presidential election.

“We have requested Rusal stop shipments of aluminum for our term contracts as we can’t make payment in U.S. dollars and we don’t want to take the risk of becoming a secondary sanction target by the United States,” explained an unnamed trading house source who spoke to Reuters.

Though the sanctions were meant to punish those targeted Russian individuals, the pain has begun to be felt far afield. In Japan, the news that Rusal aluminium is soon to be unavailable sent the market into a tailspin, doubling domestic spot premiums and spiking global prices by 20 percent.

In Japan, the news of sanctions on Rusal drove spot premiums to between US$200 to US$250 per metric ton last Friday according to another unnamed Japanese source. This is well above term premiums for the quarter, which are US$129 per metric ton.

Among Rusal’s major buyers are Mitsubishi Corp, Marubeni Corp, Sumitomo Corp, and Mitsui & Co. Of the four, only Sumitomo chose to go on record.

“We are holding internal discussions on what actions are needed to take,” explained a Sumitomo spokesperson, continuing by saying that the firm is also consulting with customers regarding alternatives supplies of raw aluminium.

According to the Japan Aluminium Association, Rusal contributes around 16 percent of the country’s total aluminium imports, or about 300 thousand metric tons of virgin aluminium each year.



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