Rusal Faces Rising Production Costs Despite Alumina Acquisition
Russian aluminum producer Rusal is experiencing increased production costs despite acquiring a 30% stake in Chinese alumina producer Hebei Wenfeng New Materials (HWNM) for $264 million in 2023. The investment granted Rusal access to 1.4 million tonnes of alumina annually, replacing lost supply from Ukraine’s Nikolayev refinery and Australia, which had accounted for 40% of its needs.
However, rising alumina prices have outpaced aluminum prices, prompting Rusal to announce a planned reduction in aluminum production by 250,000 tonnes, or about 6.5% of annual output. The company continues to purchase over a third of its required alumina at exchange prices, exacerbating cost pressures.
Alumina imports face logistical challenges, ranking last in Russian Railways' freight prioritization, while aluminum exports rank tenth. Irina Kazovskaya, chair of the Aluminum Association, emphasized that these difficulties are straining Rusal’s operations and impacting aluminum-dependent industries like automotive and mechanical engineering.
Kazovskaya also highlighted ongoing payment issues in trade with China, the UAE, and India. She called for a free trade agreement with India to provide Russian suppliers with preferential conditions in the Indian market, essential for sustaining aluminum exports.
