Us sanctions on rusal have sparked a market that has been almost silent for years.

No one expected the aluminum market to go up and down in 2018.

Glencore, the world's biggest zui commodities trader, is basking in a bumper earnings report. It lost money in the previous two years and was even predicted to be the "lehman brothers" of commodities. But the storied trading giant turned a profit in 2017 and has announced an ambitious plan to focus on copper, nickel and cobalt in 2018 to meet future growth in the electric car market.

At the beginning of 2018, mining giant Rio tinto group (Rio tinto) started to promote the full production of its new bauxite Amrun project. The anglo-australian miner's existing wepa mine, which Rio opened in 2016 for $1.9bn, has been unable to keep up with the huge appetite of its Chinese partners. Aluminum assets on the iron ore giant's financial statements, will be increasingly heavy.

After Indonesia banned the export of bauxite, six Chinese companies, including China's weiqiao aluminum group and aluminum corporation of China, have been mining bauxite in the dusty bokai region of west Africa to meet domestic demand.

The aluminium market has been quiet for years: bauxite is mined upstream to produce alumina; Alumina, cryolite, aluminum fluoride, calcium fluoride and other additives are used as raw materials to produce primary aluminum (electrolytic aluminum) by electrolysis, and then meet the manufacturing needs of downstream electric vehicles, automobiles, daily necessities and other industries.

But in the spring of 2018, the "black swan" that sparked the aluminum rush is here.

A surprise attack

"The London metal exchange (LME) aluminium futures price was $1,977 on April 6. On April 20, it shot up nearly 40% to $2,718, a near seven-year high for zui." The wild swings in aluminium prices in 2018 are fresh in the minds of analysts and traders in the sector.

"After seven days, it plunged 20 percent to $2,175."

The aluminum industry analyst said to the interface news. The 21-day surge and plunge in aluminium prices came as a result of a us sanctions imposed by the trump administration.

On April 6, 2018, the U.S. Treasury Department office of foreign assets management announced that the seven Russian business leaders and a dozen firms that are owned or controlled, 17 senior Russian officials, a Russian state-owned import and export enterprises and its subordinate banking sanctions, the reason is that they participated in the "malicious behavior" of the Russian government around the world.

Oleg Deripaska, the CEO of RUSAL (00486.hk, UC RUSAL), the world's largest aluminum producer outside China, is on the sanctions list. According to the Treasury Department notice, americans will be barred from dealing with the Russian individuals and companies, and non-americans could face sanctions for trading with them or facilitating significant transactions.

The copper-cobalt project in Congo, which glencore was watching closely, plays right into the us government's bottom line against commercial bribery. On April 9th Ivan Glasenberg, glencore's chief executive, stepped down from rusal's board.

This is in keeping with the usual style of the secretive dealer that seems to come from a spy novel: quick to react and bold to act.

Glencore is a big zui client of rusal and its CEO Ivan Glasenberg is a non-executive director of rusal's board.

Known as the "Goldman sachs" of commodities, glencore has three business segments, spanning metals, energy and agriculture. It operates more than 90 commodities, from soyabeans to aluminium, in 150 locations in 50 countries and regions.

In 2018, about 146,000 employees support the switzerland-based company, with about 83,700 full-time employees. Copper, cobalt, nickel and zinc are glencore's core assets and, like Opec with oil in its hands, any announcement of production changes by the company can trigger price swings.

What glencore did not expect was that the trump administration's sanctions would fall on aluminium, which is not a significant part of its business.

Unlike copper, cobalt and other core assets of a separate business unit, glencore's aluminum assets and iron ore assets merged into "other metals and minerals" business units.

In 2017, glencore supplied 4 million to 5 million tons of electrolytic aluminum and 5 million tons of alumina to the market through its subsidiaries and third parties including rusal.

In addition to its 12 per cent stake in rusal, glencore has Corpus Christi Alumina, an aluminium subsidiary in the us, and an old Alumina plant, Sherwin.

Glencore is the world's largest aluminium trader by volume. But established producers with their own mines, such as Alcoa, Rio tinto and norsk hydro, do not put themselves on the same list as glencore. Glencore is a trader by nature, and even as it transformed itself into a brick-and-mortar mining giant in 2013, its business model has a strong dealer undertone.

Following the us sanctions, glencore said it would consider ending a $2.4bn deal with rusal.

Paul Gait, a mining analyst at Sanford c. bernstein&co. in London, told bloomberg news that even if glencore walked away from its aluminum deal with rusal entirely, the loss would represent less than 1 percent of 2018 revenue.

Glencore quickly backed away from the aluminium sanctions, mainly to avoid provoking us sanctions on its copper and cobalt assets in the democratic republic of Congo. Glencore is more worried about the core assets on its balance sheet than it is about the aluminium industry. Mining assets in Congo, after all, account for a quarter of glencore's market capitalisation.

Rusal's Hong Kong shares lost hk $49bn in value in the week after the sanctions. But glencore's shares subsequently rose 4.6% in London on the back of its timely and rusal cutting.

"" discounted" "sanctions

According to statistics, rusal ranks first in the supply outside the Chinese market, accounting for 12.9%. Anglo-australian mining giants Rio tinto, U.A.E. global aluminum corp. EGA and Alcoa follow rusal in aluminum market share, with 12.3%, 8.6% and 8.4%, respectively.

The rest, in order, are Vedanta Resources of London, Aditya Birla of India, South32, a spin-off of BHP billiton, Century Aluminum of glencore and Press Metal of Malaysia.

The Chinese market, which supplies more than half the world's aluminum, is oversupplied.

Rusal produced 3.7 million tons of electrolytic aluminum in 2017. Rio tinto is second only to rusal, with a conservative output of 3.6 million tons. According to market expectations, rusal may cut production if it is sanctioned, and Rio tinto is likely to surpass rusal as the world's largest supplier of electrolytic aluminum outside China.

Canada and Russia are among the top sources of aluminum imports to the United States because of their dependence on imports. Rusal is also a big exporter of Russian aluminum products zui. After rusal is sanctioned, the vacated U.S. market will benefit other aluminum producers in the industry, while Rio tinto is considered a big beneficiary of zui in the north American market.

Rio tinto's aluminum assets are mainly in Canada, including ALCAN.

About half a month after the sanctions were announced, the us Treasury said it would consider easing or even lifting sanctions on rusal if its main shareholder gave up control.

The sanctions were extended until October 23, six months later.

After jumping nearly 40 percent in a month, aluminum futures in London plunged another 20 percent to their 2017 levels.

Due to the easing of us sanctions, rusal remained profitable for the first nine months of 2018, with net profit up 98.1 per cent year-on-year to $1.549 billion. During the period, rusal's electrolytic aluminum output increased by 1.7% to 2.81 million tons, of which the output reached 940,000 tons in the third quarter, up by 0.1% month-on-month.

"Rusal's ranking has not changed and it remains the largest aluminum producer in zui outside the Chinese market." In terms of capacity, rusal ranks behind wei qiao, chinalco and shandong xinfa group, analysts say.

America's pending sanctions against rusal spooked markets.

"In the second quarter of last year, rusal sanctions were extended, market bullishness subsided, and norsk hydro, the fifth-largest overseas aluminum producer, withdrew production cuts. Analysts said the domestic price of Shanghai aluminum also fell from 15,600 yuan/ton to 14,000 yuan, a decline of 9.8 percent.

On September 11, 2018, aluminum prices rebounded after bloomberg reported that rusal was preparing to cut production because it could not begin annual contract negotiations because of U.S. sanctions. It also sent Alcoa shares up 4.1 percent, the biggest gain in zui shares in a month.

According to the introduction, since October, it has been reported that the trump administration intends to lift sanctions on rusal. During the same period, China's henan and shandong provinces limited the production of electrolytic aluminum during the heating season, which was less than expected. The price of aluminum continued to fall into the fourth quarter after a shock.

In December, rusal announced that the Treasury Department's office of foreign assets management had disclosed that it had informed the us congress that it would end its intention to impose sanctions, including on rusal, within 30 days.

The news sent aluminum futures down to $1,911 a tonne, the lowest level since zui last August. Rusal shares soared as much as 25 per cent.

Although the house and senate disagreed on whether to lift sanctions on rusal, the trump administration ultimately made a choice.

January 28, 2019, rusal issued a notice, rusal and zui's major shareholder En Group Plc will be removed from the U.S. government sanctions list, effective immediately.

The U.S. Treasury Department's website said, lifting sanctions against Russia aluminum company, because the latter reduces the oligarchs deripaska direct and indirect holdings, and cut off his control over the company, to ensure that the En and the aluminum, the majority of the directors will be independent directors including and deripaska business, professional, or without any family relationship between americans and europeans.

After more than nine months, the "black swan" that has set off volatility in the global aluminium market has disappeared.

At present, the price of lunan aluminum futures fell to about $1,888 / ton, down 30.54% from its peak last year. Shanghai aluminum is 13, 600 yuan per ton, down nearly 13 percent from its peak last year.

A market that cannot be ignored

Mr Trump may have spared rusal, but another of his policies has shaken China, which accounts for half of the aluminium market.

On September 17, 2018, trump announced a 10 percent tariff on 200 billion Chinese exports and a 25 percent tariff from January 1, 2019. That spurred a surge in Chinese aluminum exports.

In the first 11 months of 2018, China's aluminum exports increased 21 percent year-on-year to a total of 5.276 million tons. Aluminum includes products made from aluminum and other alloying elements.

In particular, aluminum sheet aluminum, export growth of nearly 38%.

American importers, worried about tariffs in 2019, rushed to import in the third and fourth quarters of last year.

Price differentials at home and abroad also favour exports. The normal price ratio of Shanghai aluminum to lun aluminum is around 7, compared with 7.3 to 7.5 last year, indicating higher export prices and more profits.

In addition, the support of export tax rebate policy, as well as the low RMB exchange rate, also led to China's aluminum exports under the cloud of sanctions.

Some say this reflects the fact that China's position as an important supplier of aluminum products is difficult to be shaken by sanctions-related policies. Foreign traders, including the United States, will still consider purchasing Chinese aluminum products due to production costs and the reality of the industrial base. In 2019, China's aluminum is unlikely to see high growth.

Rusal had sought sales opportunities in China after being dumped by glencore. But as us sanctions were lifted, rusal's efforts to secure a deal with China foundered.

A large alumina and bauxite trader told jiemian news that it was the impact of the Chinese market on the aluminum market that was of more concern than the trump administration's sanctions.

The bauxite market zui is obvious. "Because Chinese demand dominates the upstream raw material, bauxite, and the alumina used to produce electrolytic aluminium." "The trader said.

In 2017, global bauxite production was nearly 300 million tons, and China consumed 170 million tons in total, accounting for 56.7 percent of global bauxite production. Bauxite is mainly used to produce alumina.

China is expected to import 82 million tons of bauxite in 2018, up about 19.6 percent year-on-year. Bauxite imports account for nearly half of China's total demand.

In the past two years, China has been strict in environmental protection and frequent environmental supervision. Many mines in shanxi and henan provinces, which are big bauxite provinces, have stopped mining, resulting in a shortage of domestic supply and a rise in imports.

China's imports of bauxite have also increased because of a decline in domestic mine grades. "It used to be possible to mine ore with an al-si ratio of 6, but now it's rare, mostly low-grade ore with an al-si ratio of 3 or 4. To produce alumina from low-grade ore, the production line needs to be adjusted and the added cost is not as good as that from abroad.

Aluminum-silicon ratio refers to the percentage of alumina and silica in bauxite ores. It is one of the main standards to measure the quality of bauxite zui, the higher the aluminum-silicon ratio, the better the quality of the ore.

Due to the tight domestic supply, the price of bauxite is relatively high in 2018, and the profit per ton can reach 200 yuan.

China currently imports bauxite, mainly from guinea and Australia, according to 2017 statistics. These two markets account for 80 per cent of China's imports of bauxite.

In 2017, China imported 27.6 million tons of bauxite from guinea, accounting for about 40 percent of its imports. It imported 25.4m tonnes of bauxite from Australia, nearly 37 per cent of its imports.

Currently, Chinese enterprises investing in bauxite projects in guinea mainly include six enterprises, namely weiqiao, chinalco, China henan international cooperation group (hereinafter referred to as henan international), state power investment group, zibo rundi aluminum company, and xinjiang zhonghe co., LTD.

Before 2014, Indonesia was the major source of bauxite imports from China. But in 2014, the country announced a mining ban and the export market was closed. Since then, Chinese aluminum companies have invested in overseas mines and sought to be self-sufficient in raw material suppliers.

Weiqiao and henan international mines have achieved mass production. Guinea overtook Australia to become the biggest market for Chinese bauxite imports in 2017.

Australia's main supplier to China is Rio tinto.

Rio tinto mined 50 million to 51 million tons of bauxite in 2018. About 25 million to 30 million tons of bauxite were exported to China, accounting for 50 to 60 percent.

Alf Barrios, chief executive of Rio tinto's aluminium group, told jiemian.com that Rio's bauxite mines used to be mainly supplied to its own smelters.

Increased sales in China were also behind Rio's development of the new Amrun mine, Mr Briberty said.

With Amrun in 2