Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Glencore will buy aluminum from Rusal next year according to its contract with the Russian producer, and so far only about 10% of its current customer base is looking elsewhere, two people with direct knowledge of the matter said.
Calls to ban Rusal’s aluminum from the London Metal Exchange’s (LME) system by US-based aluminum producer Alcoa and Norway’s Norsk Hydro had led the market to expect many would shun Rusal’s metal next year after 2022 contracts expired.
Some in the market were speculating that Glencore would also shun Rusal despite the company’s close association with it.
But European business groups representing consumers oppose any restrictions against Russian aluminum, saying they could put thousands of companies out of business and that those calling for measures “are either its main competitors” or have supply options that are not available to others.
Rusal’s aluminum and products are used by the transport, construction, and packaging industries.
Rusal has already sold 76% of its primary aluminum and value-added products for next year, the sources said. They said that the world’s largest producer outside China, which accounts for 6% of global output, would produce 4.2 million tonnes of primary aluminum next year.
“Glencore is going to take aluminum from Rusal next year,” one of the sources said, declining to detail the quantity and adding that negotiations with consumers to sell the remainder of Rusal’s product were still going on.
Glencore and Rusal declined to comment.
Rusal in April 2020 agreed on a long-term contract to supply Glencore with 6.9 million tonnes of aluminum. Of that, 344,760 tonnes were due to be delivered in 2020 and around 1.6 million tonnes a year between 2021 and 2024.
Glencore has a 10.5% stake in EN+, which has a majority stake in Rusal.
Aluminum consumers and producers have been negotiating contracts for 2023 since September.
“Talks have taken longer than usual because there is so much uncertainty about aluminum demand next year,” an aluminum buyer said, adding that the possibility of the LME banning Russian metal was also creating uncertainty.
Earlier this month, the LME launched a discussion paper on the possibility of banning Russian aluminum, nickel, and copper from being traded and stored in its system. The deadline for responses is Friday.
US President Joe Biden’s administration is also weighing restricting imports of Russian aluminum as it charts possible responses to Moscow’s military escalation in Ukraine, a person briefed on the conversations told Reuters.
(By Pratima Desai; Editing by Veronica Brown and Tomasz Janowski)
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