Aluminum gains evaporate as U.S. softens sanctions stance

Aluminum prices are tanking as the U.S. has raised the prospect of easing sanctions on a major Russian metals producer. 

The U.S. Treasury Department said Monday it would offer a reprieve to Russia's United Co. Rusal as long as oligarch Oleg Deripaska gives up control. In addition, Treasury postponed the deadline for U.S. companies to scale back dealings with Rusal.

The statement lessens the risk of a supply shortage, and prices responded quickly. 

Aluminum plummeted more than 9 percent on Monday. Shares of Alcoa (AA) crashed more than 13 percent. 

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MoneyWatch

"We have seen the peak. This is the beginning of the end of the rally," Jorge Vazquez, managing director at Harbor Intelligence, told CBS MoneyWatch. Prices would likely return to where they stood before the U.S. government moves ignited a rally at the end of last month.

Aluminum prices began climbing on March 1 when President Trump said his administration would impose aluminum and steel tariffs in the coming week. 

In the week after the White House unveiled its trade plan related to steel and aluminum imports, "the price of aluminum increased like never before in the history of the aluminum industry," said Vazquez.

The following month, on April 6, the U.S. sanctioned Rusal and other Russian entities and individuals for a variety of actions, including interference in the 2016 presidential election and its role in Syria.

"Today's statement is basically aiming at restoring order in the market and unwinding the unintended consequences" of sanctions that triggered two weeks of upheaval on global metal markets," said Vazquez. 

As the price of aluminum had rallied, Alcoa lifted its 2018 earnings forecast, and its shares surged more than 25 percent from just before the sanctions announcement. 

Alcoa declined comment on the latest Treasury action or whether it would proceed with plans to restart a smelter in Indiana in an effort to increase U.S. production.

Century Aluminum (CENX) in early March voiced strong support for the administration's 10 percent tariff on aluminum imports into the U.S. 

CEO Michael Bless in a news release, said the company would "begin the process of restarting" idled potlines at its Hawesville, Kentucky, smelter, bringing back nearly 300 jobs, and investing more than $100 million to restart and upgrade the plant. The company did not respond to requests for comment on whether those plans remained intact. Shares of Century were down 5 percent Monday.