Aluminium: Russian deadline extended

The U.S. Treasury extended a deadline for trading in Rusal and other affected companies

Carsten Menke, OpinionIndustry Expert
Carsten Menke joined Bank Julius Baer in December 2009. In his current position, he is responsible for the analysis of commodity markets, in particular base metals and precious metals. Before moving to Bank Julius Baer, Carsten Menke worked at Sal. Oppenheim Jr. & Cie. in Cologne, where he set up the Commodity Research unit. In 2002, he started working for Deutsche Bank as a Relationship Manager and became investment advisor in 2003. He received his degree in Business Administration at the University of Cologne in 2007 and became a CFA Charterholder in 2011.

August 7, 2018

As cyclical metal prices slid over the past weeks, aluminium was no exception. Prices are back to $2,000 per tonne, a level last reached in April before the U.S. imposed sanctions on Russian aluminium producer Rusal.

While partly due to mounting trade tensions and growing fears of a slowdown in China, we see a receding risk of a Russian supply shock as the main reason for aluminium’s slide.

Last week, the U.S. Treasury extended a deadline for trading in Rusal and other affected companies until the end of October, giving them more time to reach full compliance with the U.S. conditions for a lifting of the sanctions.

We believe this shows that the U.S. is aware of and tries to avoid the negative effects the sanctions would have on the aluminium market and its supply chain.

Elsewhere, China announced that heavy industry capacity cuts will again be imposed during winter in order to reduce emissions and improve air quality in its northern provinces.

While triggering fears of undersupply in the aluminium market last year, these were overdone as inventories increased. We would be surprised if this year was any different and believe that supplies should remain sufficient.

Despite the recent slide, we see no buying opportunities, expect aluminium to trade sideways and roll forward our three-month price target to $2,000 per tonne. Our 12-month target is unchanged at $1,950 per tonne.

Any opinions expressed here are the author’s own.

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