Rio Tinto closely watching industry impact of U.S. sanctions on Russian rival - InfoNews

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Rio Tinto closely watching industry impact of U.S. sanctions on Russian rival

Rio Tinto Alcan CEO Alf Barrios speaks to the Montreal Board of Trade, Wednesday, February 18, 2015 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
April 10, 2018 - 10:52 AM

MONTREAL - The head of Rio Tinto's aluminum division said Tuesday he is closely watching the industry impact of U.S. sanctions on its Russian rival, Rusal, one of the world's largest aluminum suppliers.

The United States Treasury Department on Friday announced sanctions against seven leading Russian businessmen, 17 officials and a dozen Russian companies, including the aluminum giant. Rusal shares have dropped by more than half since the sanctions were announced, and the company has warned it may technically default.

"It's a bit early yet to speculate on exactly how this is going to work out and what impact it's going to have on the whole industry," Rio Tinto aluminum chief executive Alf Barrios said in an interview.

"What is clear is that Rusal is a significant supplier of aluminum to the world and clearly we'll have to evaluate this in detail and understand exactly how we're going to manage our business."

Industry observers believe London-based mining giant Rio Tinto is among the main beneficiaries from actions taken Friday as part of the U.S. administration's attempt to punish Russia for actions including activities in Syria, Ukraine and Crimea.

Global aluminum prices have risen as the sanctions have fuelled concerns over supply.

The sanctions against Russia come as the U.S. is also escalating a trade war with China, partially by imposing aluminum tariffs on the Asian superpower and a host of other countries, from which Canada is temporarily exempt.

Barrios said he expects "common sense" will prevail when it comes to Canada's current exemption from American tariffs on the metal.

Donald Trump announced tariffs on steel and aluminum imports last month using the so-called "Section 232" of U.S. trade laws that allows the U.S. president to restrict imports and impose unlimited tariffs if a Commerce Department investigation finds a national security threat.

He gave temporary exemptions to Canada, Mexico, Australia, Argentina, South Korea, Brazil, and the member countries of the EU and suggested that a final decision on tariffs against its North American neighbours could be dependent on successful NAFTA talks. The steel and aluminum tariff exemption for Canada that is set to expire April 30.

The deadline happens to coincide with a timeline suggested as the deadline for finalizing a new NAFTA this year. Negotiators are reportedly close to hammering out a deal.

He said a U.S. decision to include Canada in the tariff would not be appropriate because Canada is considered part of the North American defence manufacturing base and supply chains are closely intertwined.

"We continue to be confident that at the end common sense will prevail but what's important for us is to work closely with the governments and the customers to ensure that we continue to maintain the highly efficient, highly-integrated supply chain between the two countries."

Barrios said it's too early to determine the global impact of 10 per cent aluminum tariffs applied against many countries, but added that the best thing for American aluminum consumers is to have access to high quality, low carbon aluminum produced in Canada using clean hydro power.

He believes the Canadian government's steps to crack down on companies that try to ship cheap foreign steel and aluminum through the domestic market was well-received by the U.S. administration, industry and customers.

Earlier Tuesday, Rio Tinto became the first company in the world to receive Aluminium Stewardship Initiative certification for its environmental, social and governance practices at its smelters in Quebec and Australian bauxite mine.

Although he doesn't expect Rio Tinto's aluminum will immediately secure a pricing premium, Barrios said it will give a competitive advantage to its Quebec assets from customers who he said will increasingly demand the certification.

Follow @RossMarowits on Twitter.

News from © The Canadian Press, 2018
The Canadian Press

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