Rusal’s first half uplift despite supply disruptions

(Posted on 16/08/18)

UC Rusal, a leading global aluminium producer, has announced its results for the three and six months ended 30 June 2018.

Total revenue increased by USD233 million, or 4.9% to USD4,997 million in the first six months of 2018 from USD4,764 million in the corresponding period of 2017.

UC Rusal is a leading, global producer of aluminium, in 2017 accounting for approximately 5.8% of global production of aluminium and 6.3% of alumina.

During 1H 2018 aluminium among other base metals was affected by series of supply disruptions. The lock-out of workers at the 450ktpa ABI smelter in Quebec has caused Canadian output fall over 8% year-on-year YTD. Meanwhile, Albras in Brazil continues to operate at half capacity following the Alunorte outage. At the same time, there is no significant rise of smelters’ restarts both in China and in the World ex-China due to high raw material costs and power supply disruptions.

Trade wars and imposed import duties, together with the OFAC Sanctions, have caused significant growth of premiums and prices increasing total costs incurred by consumers of aluminium. RUSAL supplies significant volumes of alumina to EU smelters. Consequently OFAC Sanctions against RUSAL, coupled with Alunorte outage, have caused a surge in alumina prices in April, pushing price level close to USD600/t. This in turn led to significant cost pressure on non-integrated smelters, when alumina price has approached the point of 21% of LME aluminium price against historical average of 14-15%.

UC RUSAL (Aluminum Division excl. BOAZ) produced 1.870 million tonnes of aluminum in the six months ended 30 June 2018, compared to 1.831 million tonnes in the same period of 2017. The output increased by 39 thousand tonnes (+2.1%).

The value-added products volumes for the six months ended 30 June 2018 declined to 869 thousand tonnes from 941 thousand tonnes in the same period of 2017 due to adjustment of sales mix performed by management following the OFAC Sanctions.

Alumina production was stable, amounting to 3.816 million tonnes in the six months ended 30 June 2018, comparing with 3.817 million tonnes for the six months ended 30 June 2017.

In May 2018 alumina production at Friguia refinery was restarted in Guinee at half the total capacity.

Bauxite production increased by 5.4% to 6.280 million tonnes for the six months ended 30 June 2018 from 5.959 million tonnes for the six months ended 30 June 2017 due to: CBK (Compagne Buaxites de Kindia) restoring the production level to 1,731 kt following the upgrade of the carriage rolling stock; BCGI (Bauxite Company of Guyana Inc) increasing production by 96 kt; the restart of bauxite capacity at Friguia refinery complex in April 2018.

Rusal’s evenue from sales of primary aluminium and alloys increased by USD54 million, or by 1.3%, to USD4,059 million for the first six months of 2018, as compared to USD4,005 million for the corresponding period in 2017, primarily due to 15.2% increase in the weighted-average realized aluminium price per tonne (to an average of USD2,322 per tonne in the first six months of 2018 from USD2,016 per tonne in the first six months of 2017) driven by an increase in the LME aluminium price (to an average of USD2,209 per tonne in the first six months of 2018 from USD1,880 per tonne in the first six months of 2017), which was partially offset by a 12.0% decrease in primary aluminium sales volume.

Revenue from sales of alumina increased by 22.8% to USD447 million in the first six months of 2018 from USD364 million in the corresponding period of 2017 primarily due to an increase in the average sales price by 32.1%, which was partially offset by a decrease in the sales volumes by 6.9%.