Aluminum faces a “doomsday scenario” if the U.S. proceeds with sanctions on United Co. Rusal in October, according to Wood Mackenzie Ltd., which says prices could exceed their seven-year highs in April.
The market outside China is already in deficit, and would go “into a massive shortage” if a producer the size of Rusal can’t supply metal, Julian Kettle, vice chairman of metals and mining, said in an interview in Singapore. “Prices will move to a level where you will get demand destruction” as buyers start switching to alternative materials, he said.
Aluminum spiked in April after U.S. sanctions on Rusal upended global supply chains, which were already under pressure from lower output at Alunorte in Brazil.
Billionaire Oleg Deripaska is negotiating with U.S. authorities on a plan that will lift the threat of sanctions before an Oct. 23 deadline, and Kettle forecasts prices could top their April level if his measures don’t satisfy the U.S. The metal closed at $2,537 a metric ton around the middle of that month.
“In April, it was a knee-jerk reaction. This time, if Rusal can’t comply, it’s not because they haven’t tried,” said Kettle. “It’s because they can’t comply, and that’s the reality.”
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