LONDON, Sept. 20, 2018 /PRNewswire/ -- The mounting risk that UC Rusal smelters will close in the coming months has dropped as the US Treasury permits new 2019 sales contracts. Late on Friday, the US Treasury clarified that companies can enter new deals for UC Rusal metal for 2019; this had never been previously stated.
This is hugely important for buyers of UC Rusal metal on an annual basis and for the supply and delivery of essential raw materials. The new deals, which are allowed if they are similar to last year, are contingent on further actions from the US Treasury.
Major offtake agreements to remain in place
Of UC Rusal's 3.8 million tonnes of production in 2016, 31% (of sales) went to Glencore via a multi-year offtake agreement which is expected to expire in 2019. The latest from the Treasury allows Glencore to continue taking a stable volume from UC Rusal even if that deal expires. This will keep ingot markets, which makes up the bulk of the offtake, relatively well supplied in 2019.
Major value-added products buyers will continue to buy in 2019
While a number of consumers around the world have already stopped buying from UC Rusal, a substantial share of UC Rusal value added products sales go to a relatively small number of customers. The European rolling slab, wire rod and primary foundry alloy and S. Korean primary foundry buyers are likely to extend existing contracts into 2019. Some of these buyers have been seeking new supplies and will reduce volumes from UC Rusal, but were struggling to completely replace Russian volumes.
US buyers will also have much more confidence buying Russian metal for next year. Many of our consumer contacts in the US had reported they were not considering UC Rusal as a supplier for 2019, but this development gives them the option to buy from UC Rusal.
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