Influenced by U.S. Sanctions in the Global Aluminum Market Large RUSAL Hong Kong Stocks Continued to Fall for Two Days
On April 6, the U.S. Department of the Treasury announced that it would impose sanctions on seven Russian business leaders and 12 companies owned or controlled by them, 17 senior Russian officials, a Russian state-owned weapons import and export company, and their subordinate banks. The U.S. Department of the Treasury stated in a press release that the assets of these sanctioned individuals and companies will be frozen in accordance with the law, and that ordinary Americans will be prohibited from dealing with them. In addition, non-US nationals may face sanctions for dealing with or facilitating major transactions.
Affected by this, Russia's stock market, foreign exchange market and related stocks experienced a full sell-off on April 9. First bearer is Oleg Deripaska, the major shareholder of the world's second-largest aluminum giant Rusal, and its associated assets.
Since then, commodity prices have given immediate feedback and Chinese related stocks have responded.
U.S. sanctions result in a sharp drop in RUSAL shares
On April 9, RUSAL Hong Kong shares （000486.HK） plunged 50.43%, and the market value evaporated more than HK$30 billion. During the European trading hours, the Ru+-listed RUSAL parent company En+ Group fell 25% in intraday trading. Rusal, which was listed in Moscow, also fell by nearly 30%. According to the sanctions order, Opeliga's personal assets in the United States were frozen, which may have caused Rusal's debts to fail to be repaid.
On the same day, the RTS index of Russia's main stock index expanded rapidly after a slightly lower open at 10:00 am Moscow time, once slumped by more than 11%, creating the biggest one-day drop since the index was established on September 1, 1995. The Russian ruble fell by nearly 3.5%, the largest drop since June 2016, and the exchange rate of the dollar against the Russian Ruble has risen above the 60 mark for the first time since November last year.
In its announcement issued on April 9, RUSAL pointed out that the above sanctions may cause technical defaults on some of the company's credit contracts. Initial assessments indicate that the sanctions are likely to have a significant adverse impact on the business and prospects. The company is further evaluating its impact.
Rusal and its major shareholder, Aberdeen, were sanctioned and affected the global mining giant Glencore. Rusal United is a global aluminum giant formed by the merger of Rusal Aluminum, Siberian Ural Aluminum, and alumina assets of Glencore, the world's largest commodities trading company. It has been ranked first in the world for many years. With the expansion of the capacity of China's aluminum industry, China Hongqiao has become the world's largest aluminum company.
At present, RUSAL's electrolytic aluminum production capacity is 3.9 million tons, alumina production capacity is 10.5 million tons, and aluminum foil production capacity is 90,000 tons. Its primary aluminum production in 2017 was 3.707 million tons, accounting for about 7% of global production; alumina production was 7.773 million tons, and bauxite production was 11.645 million tons. In addition, 83% of the company's revenue comes from sales of electrolytic aluminum. Rusal's aluminum supply outside the Chinese market accounts for about 17%. Rusal's US sales are more than 600,000 tons.
Previously, due to the huge debt pressure, RUSAL is interested in negotiating with international mining giant Glencore about the sale of equity. But the latest sanctions news may make this hopeless.
Glencore announced on April 10 that Ivan Glasenberg, the company's CEO, officially resigned as a director of RUSAL, and that several aluminum and alumina purchase contracts between ACE and RUSAL are being evaluated. . Glencore will also take all feasible measures to reduce the impact. Glencore also made it clear: “The previously non-binding exchange agreement signed with RUSAL will not be carried out for the time being.”
Aluminum prices and domestic aluminum prices rose sharply
Due to concerns that the latest sanctions against RUSAL may affect the United States and even the global aluminum supply, sensitive commodity prices immediately gave feedback.
LME aluminum prices rose first on the London Metal Exchange. At 0:00 on April 10th, Beijing time, LME three-month aluminum closed up 4.7%, to close at 2,139 US dollars per ton, the intraday reached 2,144 US dollars / ton, to refresh the biggest one-day gain since November 2011. Since the announcement of the sanctions on the 6th, LME aluminum has risen by about 7%.
This also affects the domestic aluminum market. On April 9, the Shanghai aluminum main contract of the domestic futures market, the 1806, increased by 1.46%. On April 10, Shanghai Aluminum further closed up 1.02% to 14,350 yuan per ton.
The expectation of global aluminum supply reduction has also driven the capital market's pursuit of domestic aluminum company stocks. As of the close of April 10, 23 out of the 25 stocks in the aluminum sector of CITIC Group rose. Among them, the regular aluminum （002106.SZ） daily limit, China Aluminum （601600.SH） rose 4.21%; East Sunshine Branch （600673.SH） rose 6.94%.
Since November 2017, domestic aluminum prices have fallen all the way from a high of 17,000 yuan/ton, and by the end of March 2018, they have dropped to the lowest point of 13,700 yuan/ton. However, since April, the long-awaited aluminum prices have begun to pick up.
Rusal's sanctions against the United States will have an impact on the global aluminum industry and the domestic aluminum market, and many domestic agencies have also made predictions. Among the more representative views, such as Shen Wan in the research report released on the 10th that, in the short term RUSAL's production capacity temporarily leave the market, LME aluminum prices will rise significantly, and drive domestic Shanghai aluminum prices.
Shen Wan analyst Xu Ruoxu and Shi Shuangshuang pointed out in their research reports that the impact of RUSAL's sanctions on the sanctions will be divided into three aspects.
First of all, due to the sanctions clause, investors must abandon and transfer the debt and equity of the three Russian companies （energy giant EN+, RUSAL and automobile manufacturer GAZ） held before May 7th. The stock price is still selling recently. pressure.
Second, at the operational level, RUSAL's new debt last year included two phases of US$1.1 billion in European debt, 220 million in Panda bonds and 1.7 billion in new pre-export loans. The limited US dollar financing means that the previous US dollar financing needs to be converted to the euro or other currencies. With the current high debt level, the pressure on debt transfer is huge.
The third aspect will affect the profits of the company. If the United States rejects the import of its products, it means that these production will be transferred to Rotterdam or other regions, affecting its sales price and profits. If Japan and South Korea also reject Rusal's export products, the situation will be even worse. However, at the same time, the gap caused by the reduction of RUSAL's supply in the global market may benefit other aluminum companies including Chinese-funded aluminum companies.
Shen Wan stated in the research report that LME aluminum prices will rise significantly （although overseas electrolytic aluminum companies such as Alcoa also benefit significantly）， along with the temporary short-term UC aluminum production capacity leaving the market temporarily （Russia also informs its customers to temporarily suspend payment）。 It also drove domestic aluminum prices up. This means that for electrolytic aluminum stocks that have fallen continuously at the bottom of the stage, this means that they are a good investment opportunity period.
Ye Jianjun, a business analyst, also said in an interview with the media that the US sanctions against RUSAL may affect the supply of international alumina and aluminum ingots, coupled with the US 232 survey and the high tariff policy on Chinese aluminum, exports to the US aluminum The tax is as high as 95%, which is bound to increase the prices of downstream products in some areas. The domestic aluminum industry has experienced supply-side reforms and the elimination of backward production capacity. The recent bullish factors have clearly shown that aluminum prices have bottomed out and rebounded above 14,000 yuan/ton. It is expected that the large probability in the later period will be steady and good, and the big market will come in June.
Excerpt from 21st Century Business Herald