Aluminum Stocks Jump on Trump Sanctions

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When President Trump threw Rusal CEO Oleg Deripaska under the bus last Friday, commodities traders and investors began to calculate how much damage the Russian aluminum giant would suffer. The answer appears to be “a lot.”

Shares of Rusal were cut in half Monday on the Hong Kong exchange, primarily due to uncertainty over how Rusal’s customers would react to the U.S. restrictions on doing business with one of 12 Russian companies owned by seven oligarchs, including Deripaska. The sanctions essentially eliminate the ability of these companies to transact business in U.S. dollars.

As with every shot fired in a trade war, there are winners as well as losers. In this case, Alcoa Corp. (NYSE: AA) and, especially, Century Aluminum Co. (NASDAQ: CENX) are the winners. British mining giant Rio Tinto PLC (NYSE: RIO) also stands out as a big winner.

According to a report from Reuters, the new sanctions on Rusal would “disrupt unwrought Russian aluminum imports” that represented about 14% of total imports from Russia last year.

The worst part for Rusal and the other Russian firms hit with the sanctions is that their customers may face new duties when they export goods using Russian aluminum to the United States.

There’s not much question that the sanctions are bullish both for the commodity price of aluminum and for shares of non-sanctioned companies like Century, Alcoa and Rio Tinto. The new sanctions come on top of a 10% tariff the U.S. is already planning to impose on all imports of aluminum. Ironically, China, which was the primary target for the earlier tariffs, may benefit from the sanctions on Russia because the tariff they pay for exports to the United States is less than U.S. premiums of about 18.5 cents a pound (and rising).

Century Aluminum stock traded up about 13% just before the noon hour, at $18.97 in a 52-week range of $11.59 to $24.77. Trading volume was already roughly equal to the daily average of around 2.5 million.

Alcoa traded up more than 7% to $51.40, in a 52-week range of $29.55 to $57.50. Share volume of about 3.8 million is less than 10% below the daily average.