SHANGHAI • Shares of the giant aluminium producer owned by Russian billionaire Oleg Deripaska plunged 50 per cent in Hong Kong yesterday as US sanctions cast doubt on the future of the firm's banking and trading relationships.
Prices of the metal, vital in the aircraft manufacturing and auto industries, jumped as traders protected themselves against the chance that United Company Rusal - the biggest aluminium maker outside China - will be prevented from supplying the global commodity market.
"This does warrant a little bit of panic buying by traders - the risk is large enough and real enough to buy on the back of insecurity of supply," said Mr Daniel Hynes, a senior commodities strategist at Australia and New Zealand Banking Group.
Rusal and seven other Deripaska-linked businesses were the most prominent targets in a list of 12 Russian companies that the United States hit with sanctions last Friday intended to punish the country for actions in Crimea, Ukraine and Syria, and for attempting to subvert Western democracies.
The sanctions - designed to make it almost impossible for Mr Deripaska's empire to do business in greenback - pose a grave threat to an oligarch who has been seen as one of Russian President Vladimir Putin's closest allies.
The share price fell 50 per cent to HK$2.32 yesterday, according to pricing from the Hong Kong Exchanges and Clearing website. It shed about 47 per cent in Moscow before recovering about half the fall.
Aluminium prices jumped as much as 4 per cent to US$2,124 a tonne on the London Metal Exchange, extending a 1.6 per cent gain in the previous session.
The sanctions may result in technical defaults on some credit obligations and be "materially adverse to the business and prospects of the group", Rusal said in a statement, adding that its annual report may also be delayed.
"The company's primary focus remains its business and, most importantly, all of its global customers, investors and partners."
The US actions target Russian oligarchs whose companies have wide-ranging involvement in international capital markets.
Mr Deripaska called the reasons for the sanctions "groundless, ridiculous and absurd".
The Foreign Ministry is working on a response, spokesman Maria Zakharova said on a state television channel, according to state news agency Tass.
"We have a whole list of possible measures that are being studied."
The move also raises questions for Glencore and its billionaire chief Ivan Glasenberg.
The commodity giant is one of Rusal's top shareholders and the biggest buyer of its metal, while Mr Glasenberg sits on the board.
BLOOMBERG
