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Russia’s largest aluminum player Rusal will acquire a 30% stake in a China-based alumina refinery, a development it said would help in accessing steady supplies of the raw material, according to a company statement released Oct. 24.
The move comes at a time when Russia continues to face hurdles for its metals industry amid sanctions from a few countries after the Russia-Ukraine war broke out, while the metals trade flow between Russia and China has grown stronger over the past year.
China’s alumina exports to Russia have been robust since March 2022, after Rusal’s alumina production took a hit due to the shutdown of Nikolaev alumina plant in Ukraine and Australia’s ban on bauxite and alumina exports to Russia.
China’s alumina exports to Russia reached 805,225 mt in the first nine months of 2023, up 22.2% on the year, according to China’s customs data.
Rusal’s deal
Rusal will buy the stake of Hebei Wenfeng New Materials for Yuan 1.9 billion ($266.9 million), the company said.
Hebei Wenfeng launched its alumina refinery in the Hebei province in March 2022, according to company data. The refiner has an annual capacity of 4.8 million mt of metallurgical grade alumina.
Rusal and Wenfeng would share alumina produced in proportion to their respective equity interests, the statement showed.
Rusal said the move would help it to acquire alumina at a competitive cost and secure supply of key raw materials.
From China’s perspective, this move is not expected to impact domestic alumina supply although the domestic alumina market could see some tightness in the near term, market participants said.
China’s has been facing an alumina oversupply over the past few years and the country would be unlikely see any severe oversupply or shortage in the absence of a black swan event, state-owned research agency Antaike said.
China’s alumina market could see a supply glut of 120,000 mt in 2023 and 380,000 mt in 2024, Antaike estimated.
Rusal produced 3.84 million mt of primary aluminum in 2022, according to company data.
Rusal’s 2022 aluminum production would have led to alumina consumption of 7.48 million mt, based on industry data indicating that typically 1.95 mt of alumina is consumed to produce 1 mt of primary aluminum, S&P Global Commodity Insights calculations showed.
Rusal’s alumina output totaled 5.95 million mt in 2022, indicating it would have seen an alumina supply gap of around 1.53 million mt, according to S&P Global’s calculations.
Rusal’s alumina demand is set to rise as it continues to expand its aluminum smelting capacity, however, its alumina production would not be able to meet its demand in the short term, market sources said. Rusal started construction of the first phase of a low-carbon aluminum production plant in Siberia with a capacity of 428,500 mt in December 2021, according to a company release.