February 28, 2020 / 8:26 AM / a month ago

Shares in Russia's Rusal slump as it warns of coronavirus risk

MOSCOW, Feb 28 (Reuters) - Russian aluminium giant Rusal expects the coronavirus outbreak to negatively affect the aluminium market in China in the first half of 2020, the company said on Friday, sending its Hong Kong-listed shares down 11% to a 2-month low.

Countries on three continents reported their first cases of the new coronavirus on Friday as the world prepared for a pandemic of the disease and investors dumped equities in expectation of a global recession.

Rusal, the world’s largest aluminium producer outside China, expects the coronavirus to cause a bigger aluminium supply surplus and weaker demand than previously expected.

“Alumina refining (in China), in certain areas in particular, is suffering from logistics issues for both bauxite arrivals and shipping out of alumina,” it added in a statement, when reporting its 2019 production results on Friday.

Aluminium producers are known for their complex supply chains. Rusal mines some of its bauxite in Guinea and turns it into alumina in Ukraine before its Siberian smelters use that to produce aluminium.

“The company guided for potential deteriorating of aluminium market fundamentals (in the first half of 2020), on which we agree,” analysts at BCS Global Markets said in a note. “This implies that the company’s financials are likely to stay under pressure.”

Rusal’s shares fell to their lowest since December 13, underperforming the Hong Kong Hang Seng Commerce & Industry Index which was down 3%.

Rusal’s 2019 aluminium production was steady at 3.8 million tonnes, while aluminium sales rose 13.8% to 4.2 million tonnes as the company sold inventory accumulated in 2018 when it was subject to U.S. sanctions.

These sanctions were imposed on Rusal when Washington blacklisted its co-owner Oleg Deripaska in April 2018. They were lifted in January 2019 but the company’s sales of value added products (VAP) - including alloyed ingots and slabs - are yet to fully recover.

Rusal said its 2019 average aluminium price fell by 15% to $1,920 per tonne, while the share of VAP in total sales fell to 37% from 45%.

Russia’s En+ Group, the largest shareholder in Rusal, also warned of coronavirus risk when reporting its 2019 operating results on Friday.

En+ Group shares were down 7% in Moscow. (Reporting by Polina Devitt; editing by Polina Ivanova and Kirsten Donovan)

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