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Report: Rusal may halt more production due to US sanctions

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Report: Rusal may halt more production due to US sanctions

Russia's United Co. Rusal PLC could be forced to shut down more of its output if U.S. sanctions are not lifted, Reuters reported Aug. 8, citing two sources.

The company's export-bound production of alloys and of value-added products could be halted as early as September, a source close to Rusal said.

The aluminum producer, along with several other Russian companies and entities, were placed on a sanctions list in April for allegedly profiting from Russia's "malign activity around the globe."

The U.S. Treasury Department recently extended the deadline for trading in Rusal and its parent En+ Group PLC to Oct. 23.

"If sanctions are not lifted in the near future, then contracts will expire and from Oct. 1, all of the company's production, intended for the external market, will once again go into the warehouses," one of the sources added.

Before the sanctions were enacted, Rusal exported about 80% of its output. Considering the figure, the situation could be "catastrophic" not oly for the company's plants around the world, but also for the global aluminum market, according to the sources. The company declined to comment, the newswire said.

Rusal recently said that it was suspending production at its Nadvoitsky aluminum smelter in Russia due to the sanctions, as production from the site was completely oriented toward the U.S. market.

Following the announcements of restrictions on the company, Rio Tinto said it was in the process of declaring force majeure on certain contracts with Rusal, while media reports also suggested that Glencore PLC would also declare force majeure on some aluminum supply in connection with the sanctions.

The report noted Fitch Ratings said that Rusal's ability to make deals on all value-added products for 2019 could be affected, as negotiations take place between September and November. "If Rusal remains under sanctions, then it cannot agree new deals," the rating agency noted.