To cut reliance on China, Russia turns to India for aluminium feedstock
Russia has increased its imports of alumina, an essential feedstock for aluminum production, from India in recent months. This strategic move by Russia serves multiple purposes:
- Diversification of Supply: Russia is facing economic sanctions from Western nations, which have disrupted its access to various markets and suppliers. By diversifying its sources of alumina, Russia reduces its dependence on specific suppliers and minimizes vulnerabilities to supply disruptions.
- Reduced Dependence on China: China is a significant supplier of alumina to the global market. By sourcing alumina from India, Russia can reduce its reliance on China, which is essential for maintaining supply security and mitigating geopolitical risks.
- Cost Reduction: Diversifying the sources of alumina can also lead to cost savings, as competition among suppliers may drive down prices and provide Russia with more favorable terms.
Alumina is a critical input for aluminum production, and Russia’s aluminum industry plays a significant role in its economy. Ensuring a stable and diversified supply of alumina is essential for maintaining the operations of its aluminum plants, particularly in Siberia.
This strategic shift in alumina sourcing aligns with Russia’s broader efforts to bolster its economic resilience amid international sanctions and geopolitical challenges. It demonstrates the country’s adaptability in finding alternative solutions to mitigate the impact of sanctions and secure essential resources for its industries.
Russia’s increased imports of alumina from India are partly a response to the challenges it faced in sourcing alumina following its invasion of Ukraine. Ukraine was one of the sources of alumina for Russia’s aluminum industry, but production was suspended in a Ukrainian refinery due to the conflict.
Furthermore, Australia, a significant global supplier of alumina, imposed sanctions on Russia and banned alumina exports to the country. These actions disrupted Russia’s traditional sources of alumina, prompting the need to explore alternative suppliers like India.
The loss of access to key alumina sources underscores the impact of international sanctions on Russia’s industrial supply chains and the importance of diversifying its sources to ensure the continued operation of its aluminum plants. This shift reflects Russia’s efforts to adapt to changing geopolitical circumstances and secure essential resources for its domestic industries.
The close relationship between Russia and China in various economic and political aspects does not alleviate the challenge facing Russia’s aluminum industry. Despite their friendly ties, Russia must contend with increased competition in the global aluminum market, primarily from China.
China has been steadily increasing its aluminum production capacity, becoming a dominant player in the global aluminum industry. This surge in Chinese production reduces the price flexibility for Russia when it comes to purchasing alumina, a key input for aluminum production.
Rusal, as the world’s largest aluminum producer outside of China, faces the dual challenge of replacing suspended alumina supplies while safeguarding its profit margins amid a potentially weaker aluminum pricing environment. Maintaining a competitive edge and securing a stable supply of alumina are crucial for Rusal’s domestic production and its position in the global aluminum market.
Russia’s efforts to diversify its sources of alumina, such as importing from India, demonstrate its determination to address these challenges and ensure the continued viability of its aluminum industry. These measures reflect the broader strategic considerations that Russia is making in response to evolving geopolitical and economic dynamics.
Rusal, one of the world’s largest aluminum producers, faced significant challenges in securing alumina supplies after losing access to sources in Ukraine and Australia. To address this issue, Rusal increased its alumina imports, primarily from China and other Asian refineries, but at a considerable cost.
Some key points regarding Rusal’s alumina supply and cost situation include:
- Own Alumina Assets: Rusal owns alumina assets in multiple countries, including Russia, Ireland, Jamaica, and Guinea, which supply approximately 70% of the company’s alumina needs, equivalent to 5.5 million metric tons.
- Loss of Supply Sources: The suspension of alumina production in a Ukrainian refinery and Australia’s ban on alumina supplies to Russia led to a disruption in Rusal’s supply chain.
- Increased Alumina Imports: In response to the lost supply sources, Rusal increased alumina imports, particularly from China. This strategy helped address the immediate supply gap but came at a significant cost.
- Higher Costs: Rusal’s alumina purchasing costs surged from $1.1 billion to $1.8 billion in 2022 due to higher raw material prices and increased delivery expenses.
- Diversification: Rusal has since diversified its alumina supply sources, securing alumina supplies from countries like India and Kazakhstan. This diversification aims to reduce dependence on any single source and enhance cost-efficiency.
- Cost Reduction in 2023: Rusal expects that its total alumina costs will decrease in 2023 compared to 2022. This reduction may result from a combination of factors, including diversified supply sources and potentially more stable alumina prices.
Overall, Rusal’s efforts to secure alumina supplies and manage costs reflect its commitment to maintaining the operations of its aluminum plants and adapting to changing market dynamics and geopolitical challenges.
Russia has significantly increased its imports of alumina from India, becoming the second-largest buyer of Indian alumina in the first half of this year, according to Indian customs data. Key points regarding this development include:
- Increased Imports: India exported 189,379 metric tons of alumina to Russia in the first half of the year, a notable increase compared to the same period in 2022 when there were no exports. This surge in imports reflects Russia’s efforts to secure alternative sources of alumina amid supply disruptions from developed nations.
- Challenges in Sourcing Alumina: Russia encountered difficulties in obtaining alumina from developed nations, leading to a shift in its sourcing strategy. Alumina is a crucial raw material for aluminum production, and securing a stable supply is essential for Russia’s aluminum industry.
- Supplier: India’s state-run National Aluminium Co (Nalco) is cited as the primary supplier of alumina to Russia. Nalco has likely played a significant role in meeting Russia’s alumina needs, helping to address the supply challenges faced by the Russian aluminum industry.
- Future Imports: It is estimated that Russia will continue to buy more than 350,000 tonnes of alumina from India in 2023. This estimate aligns with Rusal’s own calculations, indicating that the diversification of supply sources, including from India, is expected to be a long-term strategy for securing alumina.
The increase in alumina imports from India highlights the importance of diversification for Russia’s aluminum industry as it seeks to ensure the stability and competitiveness of its operations in the face of geopolitical challenges and supply disruptions from traditional sources.
Key points regarding alumina supply sources for Russia include:
- China as a Major Supplier: China continues to be the primary third-party supplier of alumina to Russia, with shipments totaling 485,160 tons in the first half of the year. However, China’s ability to provide alumina to Russia may be limited this year due to increased domestic aluminum production.
- Reduction in Supplies from Kazakhstan: Aluminum of Kazakhstan, which produces 1.3 million tons of alumina annually, plans to reduce its alumina supplies to Russia by 5% in 2023. This reduction is attributed to the company’s increased demand for alumina for its own operations.
- Estimates of Kazakh Deliveries: While the exact quantity of alumina sent by Kazakhstan to Russia is not disclosed, CRU consultancy estimates the deliveries to be in the range of 40,000 to 70,000 tons per month.
- Rusal’s Alumina Needs: Rusal, as one of the world’s largest aluminum producers, requires approximately 2.5 million tons of alumina each year from sources outside its own system.
- Distribution of Alumina from Aughinish Refinery: Rusal’s Aughinish refinery in Ireland, with an annual production capacity of 1.6 million tons of alumina, sends only 40% of its production to Russia. The remaining alumina is supplied to European markets.
These developments underscore the complexity of securing alumina supplies for Russia’s aluminum industry. The diversification of supply sources, including imports from India, reflects Russia’s efforts to mitigate supply risks and ensure the stability of its aluminum production amid changing market dynamics and geopolitical challenges.
Jamaica supplied 190,070 tons of alumina to Russia in the first half of 2023, according to the Jamaica Bauxite Institute. Although Russian alumina purchases have not had a substantial impact on the global market, the need to import alumina means that Rusal, one of the world’s largest aluminum producers, will continue to depend on the global alumina market’s price and supply-demand dynamics for the next several years.
Key points related to Rusal’s alumina supply situation include:
- Global Alumina Market: The global alumina market, excluding China, is estimated at approximately 60 million tons and is primarily dominated by suppliers like Australia.
- Dependence on Imported Alumina: Despite efforts to restructure its raw material supply chains, Rusal acknowledges its significant dependence on imported alumina. This reliance on imports exposes Rusal to the price fluctuations and supply-demand balance of the global alumina market.
- Mitigating Risks: To mitigate these risks, Rusal announced plans to build an alumina plant in a Russian Baltic Sea port in June. The project, with an estimated cost of $4.8 billion, aims to have an initial production capacity of up to 2.4 million tons annually by the end of 2028.
- Long-Term Strategy: Rusal’s decision to invest in a domestic alumina plant reflects a long-term strategic approach to secure its alumina supply, reduce dependence on imports, and enhance the stability of its aluminum production.
This investment in domestic alumina production aligns with Rusal’s broader efforts to ensure the sustainability and competitiveness of its operations, reducing reliance on external sources and safeguarding its position in the global aluminum industry.
While China remains the largest third-party supplier of alumina to Russia, with significant shipments in the first half of the year, there are challenges related to its ability to provide sufficient alumina due to rising domestic aluminum production.
Key points regarding alumina supply sources for Russia include:
- China as a Major Supplier: China continues to be the primary third-party supplier of alumina to Russia, with shipments totaling 485,160 tons in the first half of the year. However, China’s ability to provide alumina to Russia may be limited this year due to increased domestic aluminum production.
- Reduction in Supplies from Kazakhstan: Aluminum of Kazakhstan, which produces 1.3 million tons of alumina annually, plans to reduce its alumina supplies to Russia by 5% in 2023. This reduction is attributed to the company’s increased demand for alumina for its own operations.
- Estimates of Kazakh Deliveries: While the exact quantity of alumina sent by Kazakhstan to Russia is not disclosed, CRU consultancy estimates the deliveries to be in the range of 40,000 to 70,000 tons per month.
- Rusal’s Alumina Needs: Rusal, as one of the world’s largest aluminum producers, requires approximately 2.5 million tons of alumina each year from sources outside its own system.
- Distribution of Alumina from Aughinish Refinery: Rusal’s Aughinish refinery in Ireland, with an annual production capacity of 1.6 million tons of alumina, sends only 40% of its production to Russia. The remaining alumina is supplied to European markets.
These developments underscore the complexity of securing alumina supplies for Russia’s aluminum industry. The diversification of supply sources, including imports from India, reflects Russia’s efforts to mitigate supply risks and ensure the stability of its aluminum production amid changing market dynamics and geopolitical challenges.
- Global Alumina Market: The global alumina market, excluding China, is estimated at approximately 60 million tons and is primarily dominated by suppliers like Australia.
- Dependence on Imported Alumina: Despite efforts to restructure its raw material supply chains, Rusal acknowledges its significant dependence on imported alumina. This reliance on imports exposes Rusal to the price fluctuations and supply-demand balance of the global alumina market.
- Mitigating Risks: To mitigate these risks, Rusal announced plans to build an alumina plant in a Russian Baltic Sea port in June. The project, with an estimated cost of $4.8 billion, aims to have an initial production capacity of up to 2.4 million tons annually by the end of 2028.
- Long-Term Strategy: Rusal’s decision to invest in a domestic alumina plant reflects a long-term strategic approach to secure its alumina supply, reduce dependence on imports, and enhance the stability of its aluminum production.
This investment in domestic alumina production aligns with Rusal’s broader efforts to ensure the sustainability and competitiveness of its operations, reducing reliance on external sources and safeguarding its position in the global aluminum industry.
Jamaica supplied 190,070 tons of alumina to Russia in the first half of 2023, according to the Jamaica Bauxite Institute. Although Russian alumina purchases have not had a substantial impact on the global market, the need to import alumina means that Rusal, one of the world’s largest aluminum producers, will continue to depend on the global alumina market’s price and supply-demand dynamics for the next several years.
Key points related to Rusal’s alumina supply situation include:
- Global Alumina Market: The global alumina market, excluding China, is estimated at approximately 60 million tons and is primarily dominated by suppliers like Australia.
- Dependence on Imported Alumina: Despite efforts to restructure its raw material supply chains, Rusal acknowledges its significant dependence on imported alumina. This reliance on imports exposes Rusal to the price fluctuations and supply-demand balance of the global alumina market.
- Mitigating Risks: To mitigate these risks, Rusal announced plans to build an alumina plant in a Russian Baltic Sea port in June. The project, with an estimated cost of $4.8 billion, aims to have an initial production capacity of up to 2.4 million tons annually by the end of 2028.
- Long-Term Strategy: Rusal’s decision to invest in a domestic alumina plant reflects a long-term strategic approach to secure its alumina supply, reduce dependence on imports, and enhance the stability of its aluminum production.
This investment in domestic alumina production aligns with Rusal’s broader efforts to ensure the sustainability and competitiveness of its operations, reducing reliance on external sources and safeguarding its position in the global aluminum industry.
