Shares of Hong Kong and Moscow-listed aluminium producer Rusal fell by as much as 9 per cent on Monday morning after Australia slapped an immediate ban on the export of key materials bauxite and alumina to Russia. The ban – part of sanctions against Moscow for its invasion of Ukraine – on shipments of bauxite ore and intermediate product alumina was imposed on Sunday. Given that Russia relies on Australia for about 20 per cent of its alumina needs, the ban will limit Russia’s capacity to produce aluminium, Canberra said, adding that it would work with exporters to find new markets. “The company is currently evaluating the effect of the above and will make further announcements following further evaluation of the situation, if and when it is necessary or required,” Rusal said in a filing to the Hong Kong bourse on Monday. Rusal, the world’s second-largest aluminium producer, produced 8.18 million tonnes of alumina and 3.76 million tonnes of aluminium in 2020, according to the latest announced annual figures. Australia bans alumina, bauxite exports to Russia in new sanctions move A halt in alumina shipments would not mean an immediate cut in smelter output, although it would worsen the tight supply in Russia, which had weeks of alumina stocks on site rather than months, according to Ami Shivkar, principal analyst on commodities consultancy Wood Mackenzie’s aluminium team. It would also cause supply bottlenecks in the supply chain as materials are diverted to make up for shortfalls. Rusal’s shares closed 5.4 per cent lower at HK$4.03 on Monday. The stock hit a 16-month low at HK$3.23 on March 3. Rusal loses US$6 billion in Hong Kong stock rout while unhurt by sanctions Although the ban on bauxite exports is immaterial given that Rusal does not import any bauxite from Australia, the ban on alumina exports will have a material impact on the company, Uday Patel, a senior manager at Wood Mackenzie, said on Monday. Australian alumina exports represented 19 per cent of Rusal’s requirement last year, he added. “It is becoming increasingly likely that the only option for Rusal to source alumina will be via purchases through Chinese entities,” he said. “One possible outcome could be Chinese buyers purchasing alumina and redirecting sales via eastern Russian ports. However, this poses a significant political challenge for China and its trading relationship with the rest of the world.” A senior Biden administration official, who briefed reporters about four hours after the talks between US President Joe Biden and his Chinese counterpart Xi Jinping ended on Sunday, said Biden “made clear the implications and consequences of China providing material support if China were to provide material support to Russia, as it prosecutes its brutal war in Ukraine”. Sunday’s ban follows Australian sanctions last week against two Russian businessmen with links to the country’s mining industry. This included billionaire Oleg Deripaska, who owns a 56.9 per cent stake in Rusal through his firm EN+ Group. Queensland Alumina, Rusal’s joint venture with Australian mining giant Rio Tinto will not be able to supply Rusal’s Russian plant as a result of the sanctions. Queensland Alumina, in which Rusal has a 20 per cent stake and Rio Tinto the rest, calls its 4 million tonnes-a-year facility in northeastern Australia “the world’s largest alumina refinery with access to a deep water port”. Rusal said on March 1 that it had been forced to temporarily halt production at the Nikolaev alumina refinery located in Ukraine’s Nikolaev region, although it said there was “no immediate wider impact” on operations at its various aluminium smelters. Hang Seng logs worst month since November on fallout from Russia sanctions The 1.75 million tonnes a year Nikolaev refinery, located close to the port of Mykolaiv, supported about 900,000 tonnes, or 23 per cent of Rusal’s aluminium annual production, Shivkar said. “Rusal may divert some cargoes from its two million tonnes-a-year Aughinish refinery in Ireland to feed its Russian smelters,” she said in a report on March 1. “The Aughinish refinery supplies alumina to smelters in Europe, so any diversion would ultimately reduce metal supplies to a European market that is structurally short [in supply of the] metal.” In addition, if more traders become unable to transact with Rusal due to the widening international sanctions on Russia, there is a risk that all of Rusal’s overseas alumina assets could be impacted and tighten global aluminium supply further, she noted. Besides the facilities in Ireland and Australia, Rusal also has an alumina refinery in Jamaica. At the London Metal Exchange , the three-month aluminium futures price has risen 4.2 per cent in the past month to US$3,388 a tonne, after rising by as much as 15 per cent in the first few days after Russia’s invasion of Ukraine. It has surged 53 per cent over the past 12 months.