Soaring Metal Prices Delay Launch of New Aluminum Plant

Soaring Metal Prices Delay Launch of New Aluminum Plant


The launch of the plant which has been under construction for 13 years has been delayed again. RUSAL, the world's second largest aluminium company by primary production output, blames new export duties on metals that have significantly increased the company's costs.

The duties came into force on August 1. The Russian government expects them to stabilize the construction materials market where a significant price hike occurred this summer. The plan is simple: the protective duties would force smelters to sell some of their products in Russia, and sufficient supply would bring prices down to an acceptable level. However, the RUSAL management believes that their holding had not affected the price growth in any way and now it will suffer because of someone else's greed.

“Our company has a large market share but it is not the only one player. Now we got in a general movement to force prices down. There was an explosive growth of prices for rebar and rolled steel but we were not involved. However, now we may have to think about mothballing certain types of production. It is likely to affect the production of hundreds of thousands of tonnes of products. Chances are the terms of commissioning of the new Taishet aluminum smelter will be reconsidered too,” said Roman Andryushin, RUSAL Deputy Director General For Sales in Russia.

RUSAL earlier reported its results for the first half of the year. They were quite successful in general but already then RUSAL’s CEO Yevgeny Nikitin said that the forthcoming introduction of export duties on metals and, of course, the uncertain situation caused by the continuing COVID-19 pandemic were likely to “drastically change” the results of the year as a whole. Now, the holding has already increased its capital expenditure forecast for 2021 from $1-1.1 billion to $1.1-1.3 billion. A total of 17% of this expenditure is earmarked for completion of the Taishet aluminium smelter project. However, it is not quite clear from which date the launch of the plant, which has been under construction for 13 years, will be postponed.

The fourth quarter of this year has been recently mentioned in the documents of RUSAL. Although it was announced earlier that the plant would be launched in July. In particular, the company's top management publicly assured Igor Kobzev, Governor of the Irkutsk Region, of this in February. It was also said earlier that the production would start at the end of 2020. Apparently, the completion of the second phase of the Taishet anode plant, initially planned for 2023, is now in question. About $1.6 billion has been invested in the construction of Taishet anode plant so far. As wrote earlier, the capacity of the first stage of the plant was expected to be 428,500 tonnes of aluminium per year. Overall, RUSAL produces about 4 million tonnes of metal per year, 2.8 million tonnes of which are exported.

“An increase in export duties might reduce the competitiveness of our smelters, as practically the entire industry is export-oriented. It is necessary to go back from requisitioning of produce and withdrawing of excess profits. It is necessary to develop programs for the sector’s modernization together with businesses and legally oblige them to invest super profits in development,” says Andrei Tenishev, Head of the RANEPA Competition Law Department.

Not all of RUSAL's stockholders share this panic. In particular, according to SUAL owned by Victor Vekselberg, a major co-owner of the holding company, there is no reason to reduce production and reschedule the launching of new plants. In fact, SUAL's top managers have not even discussed this issue with the other shareholders.

“The current level of profitability of production does not require such drastic measures in connection with the introduction of increased export duties,” the holding's press office said.

Troubles of another kind and scale follow RUSAL. Recently, the Krasnoyarsk Territory Prosecutor approved the indictment in the criminal case against the head of the Krasnoyarsk aluminum plant (KraZ), who is responsible for environment, labor protection and industrial safety. He is being charged under the Article ‘Pollution of the atmosphere,’ the press service of the Prosecutor General for the Siberian Federal District told According to the investigation, the plant made emissions of hydrogen chloride, classified as Hazard Class 2, from 2018 until early 2021. The emissions were stopped only after KraZ installed additional gas purification equipment at the prosecutor's insistence. The case seems rather shadowy. KrAZ has been consistently polluting the air in the city area for decades. The enterprise is “improving the situation” by investing into environmental re-equipment but there is still a lot of things to be done. The supervisory authorities also made claims to the plant earlier but as a result, the company got off with fines. The criminal case against a major plant top manager is a quite exceptional precedent.

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