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Report: Rusal may be forced to cut aluminum production due to US sanctions

United Co. Rusal PLC may be forced to scale back production next year and close some product lines, unless it reaches a resolution over sanctions with the U.S. Treasury this month, Bloomberg News reported Sept. 10.

Widely rocked by sanctions, the Russian aluminum producer previously shut down production at the Nadvoitsky aluminum smelter in August, citing it can no longer continue as it lost access to its U.S. end market.

According to the report, Oleg Deripaska's representatives are said to be in constant contact with Treasury officials. However, sources said there is no indication when a deal might be reached to lift the sanctions, which may keep Rusal locked out of annual contract negotiations that will kick off this week in Berlin.

Bloomberg added that there are concerns the sanctions would not be lifted before the Oct. 23 deadline, as the discord between the U.S. and Russia are deepening and the U.S. congressional elections in November looming.

In August, Deripaska's En+ Group PLC, which controls Rusal, submitted the final version of its proposal to the U.S. Treasury's Office of Foreign Assets Control as it looks to be removed from the U.S. sanctions list.

Deripaska has previously stepped down from the boards of both En+ and Rusal, with both companies electing a new board of directors in a bid to ease sanctions.

Earlier this month, a Reuters report noted that European customers will avoid the aluminum producer at talks in Berlin to finalize metal supply agreements in 2019, as sources disagreed with the expectation that the sanctions will be lifted in October, adding that they "can't agree a deal with Rusal."

The U.S. Treasury Department, in July, extended the deadline for trading in sanctioned Russian firms Rusal, En+ Group and Gaz Group to Oct. 23 from the previous deadline of Aug. 5.

The potential shutdown of its production lines add to the woes of the aluminum giant, as a Sept. 10 report from Reuters revealed that Russian state-owned power company RusHydro is uncertain about its planned investment in Rusal's proposed Taishet aluminum smelter project in Siberia due to the U.S.-imposed sanctions.

In the second quarter, the aluminum producer's profit fell by 25.0% on a quarterly basis to US$408 million.