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Report: Rusal starts talks to win back customers lost during US sanctions

United Co. Rusal PLC, the world's largest aluminum producer outside China, has started the aluminum industry's so-called mating season with the hope to win back customers lost a year ago when sanctions hit the company and disrupted aluminum markets, Reuters reported Oct. 1, citing six industry sources.

Rusal aims to secure 2020 supply contracts during these talks, which mark the first round of fall negotiations since the U.S. Treasury Department's Office of Foreign Assets Control lifted the sanctions on the company in late January.

However, the sources said the talks have just begun and very few contracts have been signed so far.

In response to a question about the talks factoring in the risks of the penalties being imposed again, one of the company's largest clients told the newswire that no one is concerned about the threat of sanctions against the company anymore.

Along with other producers, Rusal is being pushed to lower prices for 2020 contracts, sources told Reuters, with a trader adding that some potential clients are trying to use the sanctions as leverage to secure cheaper aluminum deals, though this is also due to high levels of supply available.

Benchmark aluminum prices on the London Metal Exchange are at about US$1,720, their lowest since January 2017, according to the report.

The company has been looking to increase its share of value-added products such as alloyed ingots and slabs in its 2020 sales, which may prove difficult due to low prices. Rusal is aiming to bypass traders and go straight to end users this season, a trader said, adding that Rusal had not offered a discount to his company and that the offers were priced similarly to its competitors.

A Middle Eastern customer said Rusal's offers were in the same range as its competitors this season, according to Reuters.

A European industry player said many customers were not concerned by sanction risks because those who entered into contracts with Rusal before the penalties were imposed in April 2018 were allowed to fulfill them.

Additionally, the European source said there is room for the company to expand its share in the Spanish market.

Rusal's second-quarter profit plummeted to US$285 million from US$408 million a year ago.