The Aluminum Association warned of the possible closure of Rusal plants

Rusal (MOEX: RUAL) may freeze or close a number of enterprises due to the worsening economic situation and rising taxes, it follows from review Aluminum Association, of which the company is a member. The Association noted that several Rusal enterprises are already operating on the verge of negative profitability.

“A number of Rusal enterprises are already operating on the verge of zero or even negative profitability. A deterioration in the economic situation or an increase in the fiscal burden may lead to the need to freeze or close them. In this case, about 5 thousand jobs in the industry and up to 30 thousand more in related and service sectors will be lost,” says a message on the Association’s website.

The association does not name these factories. However, in October Interfax wrote, that we can talk about three aluminum enterprises: Kandalaksha, Volgograd and Novokuznetsk plants. Their capacity is designed to produce 500 thousand tons of aluminum (in 2022, the company produced a total of 3.83 million tons – 5.6% of global aluminum production).

The Association also admitted that if the economic situation worsens, the eco-modernization program of aluminum smelters in Krasnoyarsk, Bratsk, Shelekhov and Novokuznetsk with a total cost of 380 billion rubles could be stopped. Investments in social programs and social infrastructure in the cities where Rusal operates may also be at risk.

Speaking about the aluminum industry as a whole, the Association pointed out that now “due to the actions of unfriendly countries and a number of external factors” it is under unprecedented pressure. Due to supply constraints, the industry has lost over a third of its alumina needs. Supplies organized as an alternative from Asian countries, where prices for alumina are 25% higher, led to significant financial losses for the industry, the Association emphasized.

Exchange prices for aluminum have been at record lows since March 2021, and the cost of aluminum production and alumina production in the industry is continuously growing. “Export duties introduced by the government further worsen the situation with production costs. EBITDA of industry enterprises after the introduction of duties may decrease by another 30%, and a number of production facilities will become unprofitable against the backdrop of low prices for aluminum,” the review says.

RUSAL is one of the world’s largest producers of primary aluminum and alumina. The company’s revenue for 2022 was $13.97 billion, and net profit was $1.79 billion. He had previously closed businesses. Thus, in August 2018, the company announced the completion of mothballing the electrolysis capacities of the Nadvoitsky aluminum smelter due to sanctions imposed by the United States. In 2021, the company announced its intention to mothball some of the capacities of the former SUAL plants, which were included in OK in 2007. Then Rusal explained the need to reduce capacity by the loss of “hundreds of millions of dollars” against the backdrop of the introduction of an export duty on metals (which ceased to apply in December 2021).

Read more about the company’s activities in the Kommersant article. “Rusal is loading closer to Asia”.