Russia can buy aluminium for state reserve to support Rusal

Russia can buy aluminium for state reserve to support Rusal Photo: pixabay.com

The Russian government is ready to act as ''a guaranteed buyer'' for Oleg Deripaska's Rusal in case of tougher economic sanctions. Although $149 million allocated by the government is a rather modest sum compared to the company's monthly export volume, the decision is still useful as a way to support liquidity, believe industry experts.

The Russian government can buy up to 50,000 tonnes of aluminium for the state reserve, says Reuters, adding that the purchase will support Rusal aluminium producer Rusal, which is currently under US sanctions. A corresponding decree, which was signed on 26 November, envisages allocating up to 10 billion rubles ($149 million) for aluminium purchases. According to a government source, the decree is the initiative of Rusal's major shareholder Oleg Deripaska. Rusal together with other companies was hit by sanctions in April.

The decree does not specify the reason for the potential purchases, but in August, Minister of Industry and Trade Denis Manturov said that the government had a backup plan to support Rusal if the sanctions stayed in force including buying aluminium for the state reserve. On Thursday, Manturov confirmed that Russia could still buy more than 50,000 tonnes of aluminium from Rusal and the move would depend on US sanctions against the company.

Minister of Industry and Trade Denis Manturov confirmed that Russia could buy more than 50,000 tonnes of aluminium to support Rusal. Photo: kremlin.ru

The volume covered by the decree is small: 50,000 tonnes total around 17% of Rusal's monthly exports. Nonetheless, the move may serve as a form of insurance for the company if it faces a cash shortage, commented Maksim Hudalov, an analyst at Russian ACRA rating agency, adding that Rusal has a guaranteed buyer in a situation when Western financial institutions refuse to extend credit. "...As a way to support the liquidity of the company, I think it will be useful. I don't think the state reserve will actually buy anything, but having the opportunity to realise a delivery will be valuable for the company," Hudalov said.

The decree does not specify a timeframe of the purchase, but the government source claimed that the action was being considered as a one-off step. Rusal's Moscow-traded shares in Russian aluminium giant Rusal added 2% on the news, says Reuters.

By Anna Litvina