This Morning in Metals: U.S. to Lift Sanctions on Russian Oligarch Deripaska’s Companies

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This morning in metals news, the U.S. Treasury Wednesday announced it will lift its sanctions against companies owned by Russian oligarch Oleg Deripaska (which includes aluminum giant United Company Rusal), Chinese steel prices hit a five-week high and Alcoa cuts aluminum production amid a labor dispute at its Becancour smelter in Quebec.

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U.S. to Lift Sanctions on Russian Firms

On Wednesday, the U.S. Treasury Department announced it would delist several Deripaska-controlled companies, not long after previously announcing a sanctions deadline pushback to Jan. 7.

“Treasury sanctioned these companies because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, not for the conduct of the companies themselves,” Treasury Secretary Steven T. Mnuchin said. “These companies have committed to significantly diminish Deripaska’s ownership and sever his control. The companies will be subject to ongoing compliance and will face severe consequences if they fail to comply. OFAC maintains the ability under the terms of the agreement to have unprecedented levels of transparency into operations.”

According to the Treasury Department’s announcement, it will terminate the sanctions imposed on En+ Group plc, UC Rusal plc and JSC EuroSibEnergo in 30 days.”

MetalMiner’s Take: LME aluminum prices have increased slightly today on the news knowing that the Trump administration will lift sanctions on Russian companies owned by oligarch Oleg Deripaska.

However, the increase does not appear sharp. Prices increased following the previous pattern, and aluminum prices are still lower than they were at the beginning of the month. This decision will not have a large impact on the aluminum market.

In April, when the sanctions were announced, the aluminum market felt constraint regarding supply; prices subsequently spiked.

However, current market conditions are far different from April 2018.

Crude oil prices are lower, commodities are decreasing and the U.S. dollar is rising. Also, Section 232 and all the other tariffs still remain in effect.

Therefore, buying organizations won’t see dramatic changes in LME aluminum prices, in both the short and long terms.

Alcoa to Cut Production at Quebec Smelter

Alcoa announced Wednesday that it will cut production by half at its Aluminerie de Bécancour Inc. smelter in Quebec.

“The Bécancour aluminum smelter, owned by Alcoa (74.95%) and Rio Tinto Alcan Inc. (25.05%), has nameplate capacity of 413,000 metric tons per year, across its three potlines,” Alcoa said in a release. “Two of the facility’s potlines were curtailed on January 11, 2018, after union members rejected a proposed labor agreement for hourly employees.”

Alcoa said curtailment of the one operating potline, which has a nameplate capacity of 138,000 metric tons per year, was “necessary to ensure continued safety and maintenance in light of recent retirements and departures.”

Alcoa and the union representing its workers still remain without a labor agreement almost a year after the other two potlines were curtailed.

“After extensive negotiations this year, ABI and the union have yet to reach an agreement on key terms to improve productivity and profitability,” Alcoa said in its release. “ABI’s management remains committed to reaching a negotiated agreement.”

According to Alcoa, curtailment of the one operating potline will begin Friday, Dec. 21.

Chinese Steel Prices Hit Five-Week High

Chinese steel prices, which have lagged of late, rose to their highest level in five weeks, Reuters reported.

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Shanghai rebar steel prices rose as much as 1.8% Thursday before settling up 1.5%, according to the report.

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