Rio Tinto Warns 2018 Aluminium Output May Suffer Due to Rusal Sanctions

Rio Tinto Warns 2018 Aluminium Output May Suffer Due to Rusal Sanctions

Repercussions continue to be felt throughout the global aluminium trade as evidenced by Rio Tinto Group’s announcement on Wednesday that it may revise its 2018 aluminium output on account of sanctions placed upon U.C. Rusal by the United States Treasury Department earlier this month.

In the course of its announced production results, the firm projected a yearly total output of 3.5 million to 3.7 million metric tons, which it indicates may be adjusted upon the completion of the sale of the aluminium smelters Aluminium Dunkerque and ISAL. However, in the very next breath, Rio Tinto said that further adjustments may “be made as a consequence of the U.S. sanctions.”

Rio Tinto has already announced to its shareholders that it is invoking force majeure on several of its agreements with Rusal, including its partnership in Queensland Alumina, several supply and offtake agreements, sales to Rusal’s alumina refinery in Iceland, and offtake contracts for alumina.

Though the sanctions represent a cloud upon the face of Rio Tinto’s partnership with Rusal, there may still be a silver lining, as Rio Tinto is among the top suppliers of raw aluminium to the U.S. via its Canadian smelters, which, at the moment, are exempt from the Trump aluminium tariffs. Enjoying a significant barrier to entry against all other comers, Rio Tinto may well find itself in a substantially lucrative position, especially as aluminium prices continue rising to new heights thanks to global instabilities and uncertainties.

Rio Tinto produced 12.7 million metric tons of bauxite ore in the just-ended quarter, 12 percent above the corresponding quarter last year, but 8 percent off from the previous quarter. The company refined 1.99 million metric tons of alumina in Q1, off by 3 percent from last year and down by 4 percent from last quarter. Rio Tinto’s first-quarter aluminium production totaled 846 thousand metric tons, down 5 percent from 2017’s first quarter, and down 5 percent from last year’s fourth quarter.