SHANGHAI, Mar 21 (SMM) - According to foreign media reports, Australia’s Prime Minister Morrison announced an immediate ban on the export of alumina and aluminum ore, including bauxite, to Russia, on March 20, as additional sanctions against Moscow. Aluminium is one of Russia's important exports. "Russia relies on Australia for nearly 20% of its alumina demand and the ban will limit Russia's ability to produce aluminium," Morrison said in a statement. In addition, the Australian government announced it would donate more military equipment, humanitarian aid and coal to Ukraine to fend off the invasion, while imposing additional sanctions on Russia.

 From the perspective of Rusal's alumina supply:

 Russia is the largest producer of aluminum other than China. In 2021, Russia's aluminum production reached 3.76 million mt, accounting for more than 5% of global production. In order to match such high aluminum output, Rusal has an alumina capacity of about 9.5 million mt/year. In 2021, Rusal’s alumina output was 8.3 million mt, accounting for 6.3% of global alumina production. The distribution of Rusal’s alumina refineries shows that about 66% of them are outside Russia and located in Ireland, Jamaica, Ukraine, Guinea and Australia. Rusal’s installed alumina capacity in Russia totals 3 million mt. Its Ewarton refinery in Jamaica has an installed capacity of 675,000 mt, Aughinish refinery in Ireland has an installed capacity of 2 million mt, Nikolaev refinery in Ukraine has an installed capacity of 1.77 million mt, and Friguia refinery in Guinea has an installed capacity of 675,000 mt, and its refinery in Australia has an installed capacity of about 1.5 million mt. At present, Nikolaev refinery in Ukraine has stopped production. Given the sanctions imposed by Australia, Rusal’s 1.5 million mt/year alumina refinery in Australia will also face the risk of cutting production. If Rusal wants to guarantee its production of aluminum, it has to seek alumina from other regions.

Rusal's bauxite supply:

Rusal has three bauxite projects in Guinea, with a combined output of 7.5 million mt of bauxite in 2021, accounting for 50% of Rusal's total bauxite production. Among them, the Dian-Dian mine mainly supplies bauxite to the Aughinish alumina refinery in Ireland, the Friguia mine mainly supplies to the local Friguia alumina refinery, and the Kindia mine mainly supplies to the Nikolaev alumina refinery in Ukraine. Due to closure of Nikolaev refinery, Rusal has been shipping bauxite that was originally bound for Ukraine to its Aughinish refinery in Ireland recently. On the whole, Rusal has enough bauxite for its own use, but it is necessary to pay attention to the impact of the current turmoil on sea freight and shipping capacity.

The current focus is still on the supply of alumina in Russia

Based on the installed aluminum capacity in Russia, Rusal still needs additional 4 million mt of alumina. The closure of the 1.77 million mt/year Nikolaev refinery in Ukraine has made things even worse for Rusal. In order to ensure the stable operation of high-profit aluminum, Rusal may seek alumina from neighbouring  countries. China may become Rusal's best alumina supplier in terms of its advantageous geographical location and huge installed capacity.

On the whole, the overseas alumina market tends to shift from a tight balance to a supply deficit.

 As of March 20, alumina prices have soared to $535/mt FOB Western Australia, and the price difference between China and overseas has gradually expanded to 1,450 yuan/mt. As a big alumina producer, China may be able to fill in supply gap of Rusal or even overseas market. If China’s alumina exports grow significantly, domestic alumina prices will find solid support.