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.
Rusal’s 2022 net profit fell by around 44%, the Russian aluminum giant said on Friday, as it faced logistics challenges, increased costs and market volatility sparked by the conflict in Ukraine.
The big drop in profits and higher costs highlight the damage to Rusal’s business as one of the world’s top aluminum producers deals with the impact from events in Ukraine, with some buyers choosing not to renew contracts to buy its metal due to the conflict.
Hit by a production halt at an alumina refinery in Ukraine and an Australian ban on exports of alumina and bauxite to Russia, Rusal reported a profit of $1.79 billion, down from $3.23 billion a year earlier.
It said production costs jumped 31.8% to $2,190 per tonne from $1,661 a year earlier. The cost of purchasing alumina leapt by 149.3%, it said, as the company sought new suppliers.
The cost of sales jumped by 30.2% to $10.77 billion.
The Mykolaiv Alumina Refinery was nationalized by Ukraine in February 2023. Rusal is planning to appeal the decision of the High Anticorruption Court of Ukraine, it said, but wrote off the refinery’s assets as of Dec. 31, 2022.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) fell almost 30% to $2.03 billion.
Glencore will not renew a $16 billion deal to buy aluminum Rusal when it expires next year, Bloomberg reported on Thursday. A company spokesperson confirmed the content of the report to Reuters.
Rusal aluminum at the end of January accounted for 41% of total on-warrant LME stocks.
The share of Russian aluminum in the stocks of warehouses registered for the London Metal Exchange (LME) rose to 46% as of the end of February from 41% as of Jan. 31 and totalled 200,600 tonnes, the LME’s data showed.
Rusal warned that difficulties in equipment deliveries could delay some investment projects and said it was searching for resolutions for logistic difficulties.
The United States imposed a 200% tariff on aluminum produced in Russia from March 10, effectively banning Russian aluminum exports to the country.
Rusal did not mention Glencore or the new US tariff in its report, nor did it give a market forecast.
“Geopolitical tensions, since February 2022, significantly increased volatility on the commodities and currency market,” Rusal said, meaning stakeholders should treat any forecasts with caution.
(By Anastasia Lyrchikova and Alexander Marrow; Editing by Jason Neely)
Comments