MOSCOW, December 11. /TASS/. Rusal may suspend operations at or close a number of enterprises due to a deteriorating economic situation coupled with an increase in taxes, as a number of the company’s entities already operating in the red, the Aluminium Association said in a statement.
"A number of Rusal’s entities are already operating at almost zero or even negative profitability today. The deterioration of the economic situation or increase in the fiscal burden may make it necessary to suspend operations or close them completely. In this case around 5,000 jobs in the sector and up to 30,000 in adjacent and tertiary sectors will be lost," the statement reads.
As a result of actions by unfriendly countries and a whole host of external factors Russia’s aluminum sector is facing unprecedented pressure, putting it at risk of a crisis that will have long-term consequences, the association stressed.
In particular, until 2022 the sector was getting more than 100% of its aluminum from its own overseas production. In 2022, aluminum supplies were suspended from enterprises in Nikolayev, Australia and partially Ireland, and supply channels from many traditional suppliers were blocked. As a result, the sector lost more than one-third of the aluminum it needed and had to switch to getting it from Asian countries, at a financial loss as aluminum prices in Asia are 25% higher on average than in the previously available markets.
Many traditional target markets were also lost, while working in others became complicated. For example, the US, the UK and Australia imposed protective duties on aluminum from Russia - by 270% and by 35% each, respectively. In the European Union key processers applied the ‘self-sanctions’ practice as they abandoned aluminum from Russia, while the decision on the 12th package of EU sanctions is expected shortly, which could add products needed in the aluminum industry (wire, foil, tubes and pipes). On the other hand, global competition in terms of metal supplies has intensified a great deal, exchange prices for aluminum have been at record lows since March 2021, while regional premiums for prices have fallen to a three-year low.
Export duties imposed by the Russian government starting October 1 make the situation with the production prime cost even worse, without the possibility of recouping these losses. The sector was low-yield even before the duties were introduced as around 13% were projected by the end of 2024. According to analysts, EBITDA of enterprises operating in the sector may lose another 30% after duties are imposed, while a number of facilities could go under due to low aluminum prices.
Rusal is the largest aluminum producer outside of China and the only primary aluminum producer in Russia. En+ Group founded by Oleg Deripaska is the largest shareholder of Rusal, owning a 56.88% stake. SUAL Partners holds a 25.52% stake.