Rusal drops on USA sanctions

Aluminium giant Rusal share price halved after US sanctions

The company made this statement amid a sharp plunge in its shares: they fell by more than 40% on the stock exchange in Hong Kong. Rusal shares have dropped more than 50% this week.

Rusal is the second-largest aluminum maker in the world, while the United States is the largest importer of aluminium.

Russia's Moex stock market fell 7.6%, hitting funds exposed to the country.

"We expect the risk of secondary sanctions will impact well beyond just USA imports, and Rusal material will indeed be shunned by many non-US consumers and their financing banks", said Oliver Nugent, a commodities strategist at ING.

The US sanctions explicitly bar US entities from doing business with Rusal.

"This is due to sanctions imposed by the United States on Russian oligarchs and their companies on Friday", it added.

The US said however that Friday's action was taken under a law passed to punish Russian Federation for its alleged bid to interfere in the 2016 US presidential vote, as well as its intervention in conflicts in Syria and Ukraine.

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Separately, Rusal warned that the sanctions impact "may result in technical defaults in relation to certain credit obligations of the group, and the company is now evaluating the impact (if any) of such technical defaults on the financial position of the group".

Concerns also spread to Glencore, the FTSE 100-listed mining and energy giant.

The move also raises questions for Glencore and its billionaire chief Ivan Glasenberg.

'The Russian government operates for the disproportionate benefit of oligarchs and government elites, ' said Treasury secretary Steven Mnuchin.

"The biggest blow was taken by public companies controlled by Oleg Deripaska", Moscow brokerage Aton wrote in a briefing note, adding that the market was looking for "possible actions to minimise" the damage. He said the new U.S. sanctions were unacceptable and illegitimate, and that the government would come up with plans to support the companies affected.

The sanctions have had knock-on impact on precious metal palladium, which has surged 6 percent this week on the back of concerns about supply from number one producer Russian Federation. "The situation is pretty egregious from the point of view of legality, it tramples on all kinds of norms, and so a thorough analysis is necessary", he said.

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