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The aluminum market is having its own Iran oil moment.

Similar to how U.S. and European sanctions in 2012 cut Iran’s oil sales to the world, last week’s American penalties on United Co. Rusal look set to freeze the Russian company’s aluminum out of western markets. The reaction has already been severe: prices are up more than 10 per cent and the world’s biggest metals exchange will stop accepting new Rusal supplies.

The market has been roiled because Rusal accounts for 6 per cent of global output of the metal -- more than Iran’s share of the oil market. Users outside China are particularly reliant on Rusal. Metal supplied by billionaire Oleg Deripaska’s firm is estimated to make up a third of inventories on the London Metal Exchange.

“We can’t make it without Rusal,” said Colin Hamilton, head of metals at BMO Capital Markets Ltd. “We need Rusal material.”

Glencore PLC declared force majeure on about 50,000 metric tonnes of contracts that specify the metal should be of Russian origin, according to people familiar with the matter who asked not to be identified because the matter is confidential.

There’s still some uncertainty over what will happen to Rusal and its metal, and the Russian government is said to be working on a plan to support the company. That could help its supplies reach Western markets if smelters are transferred to a non-sanctioned company, although the Finance Minister Anton Siluanov on Wednesday said there were no plans for the government to buy a stake in Rusal.

Since the U.S. blacklisted Rusal on April 6, the largest producer of the metal outside China has lost more than half its value in Hong Kong. International trading houses have stopped buying from the company and the LME on Tuesday said aluminum made by Rusal after April 6 can’t be used to settle futures contracts on the exchange. CME Group Inc.’s Comex also said it won’t allow deliveries of Rusal material.

“The LME suspension of fresh Rusal production certainly makes it far less appealing even for non-U.S. entities to purchase,” said Oliver Nugent, commodities strategist at ING Bank NV. “It definitely adds to the theory that this is a real loss of supply to the world market.”

That will further tighten the market outside China, which was already in a deficit, said Mr. Nugent, adding that prices will need to rise to a level that encourages aluminum exports from China.

When sanctions on Iran were widened in 2011 and 2012, the country’s oil exports fell sharply. While Asian countries continued buying oil from Tehran, and some Chinese and Indian companies increased purchases, Iran’s overall exports fell 46 percent between 2011 and 2014, according to the U.S. Department of Energy.

Selling Metal

Some traders see Rusal now having to redirect its metal towards Asian markets.

“Where does Rusal now have as its potential customer base to sell material? More doors are closing,” ING’s Mr. Nugent said. “The last customer base for Rusal is quickly becoming China.”

Rusal has asked some customers if they can pay in euros instead of dollars, according to one Asian buyer. Still, international traders say they’ve been advised by their banks and lawyers that they can’t continue dealing with the company in any currency.

“Circumventing financial sanctions is possible, of course, and in fact there’s already international experience of this,” said veteran Russian banker and former senior central bank official Oleg Vyugin. “Iran did it,” though the scope for that is limited and transaction costs are high, he said.

There may not be a permanent damper on Russian flows to western markets.

Russian government officials, Rusal executives and state bankers are scrambling to come up with rescue plans for the company, which employs almost 60,000 people and accounts for about 16 percent of the country’s export earnings.

Efforts are still in the early stages and no plans have yet been finalized, two people involved in the talks said. Options may range from debt restructuring to the transfer of Rusal’s smelters and other assets to a new company, possibly state-owned, if it wouldn’t be subject to the sanctions. Rusal is also looking at whether it can get special licenses from the U.S. Treasury to continue some limited export operations.