Gold Silver Reports (GSR) – Russia Sanctions Throw Global Aluminum Industry Into Chaos — As producers like Rio hunt for new buyers for their bauxite and sources of alumina to feed smelters, the global chokepoint created by the sanctions means that many of the miners, refiners and smelters that should be benefiting from surging prices are actually facing challenges just to keep their operations running. For aluminum smelters, suspending operations is a worst-case scenario and restarting is very expensive.
While Rio is the top miner of bauxite, the raw material that becomes aluminum, it’s dependent on Rusal for a key intermediate step in the process — the conversion of bauxite into alumina. Rusal’s refining operations, which stretch from its Aughinish plant in Ireland to operations in Jamaica, are a vital cog in a global interlocking supply chain that’s now been thrown into chaos.
Rio, the world’s second-largest aluminum producer outside China after Rusal itself, is evaluating what shipments or supplies it can reroute and assessing its stockpiles, according to a person familiar with the situation. The company may even have to mothball some plants if supplies can’t be found, said the person, who asked not to be identified because the deliberations are private.
Read More : Commodity Traders Stop Buying From Rusal After Sanctions
“The market will remain very tight while long-term buyers of Aughinish look for potential solutions,” said Anthony Everiss, a senior consultant at CRU Group. “It’s a pretty nightmarish scenario for them. There’s not that much on offer in the Atlantic to fill that gap.”
Alumina prices have already rocketed, jumping by more than a quarter in the last week and heading for a record. Prices have been driven higher by a combination of the sanctions on Rusal, which was said to have declared force majeure on some shipments of the commodity Thursday, and production cuts at Norsk Hydro ASA’s giant Alunorte alumina refinery in Brazil, the world’s biggest. Force majeure allows contracts to be left unfulfilled.
Alunorte has been running at 50 percent since a late-February court order amid accusations that a rainstorm led to contamination of an Amazonian river. Any change in its output levels will be key for the global market.
India’s state-owned National Aluminium Co. is already seeing the benefit. The producer said it sold a 30,000-metric-ton cargo of alumina in a tender last week at $601 a ton, the most it’s sold a shipment for in 12 years. That’s enough to make 15,000 tons of aluminum.
Aluminum surged to a six-year high Tuesday, with prices rising as much as 1.5 percent to $2,435 a metric ton on the London Metal Exchange, the highest intraday price since September 2011. – Neal Bhai Reports (NBR)
