Rusal Releases Operating Results for FY 2015

Rusal Releases Operating Results for FY 2015

Moscow’s United Company RUSAL released its operating results for the fourth quarter and the fiscal year of 2015 today. The firm’s aluminium and alumina businesses held the line, while bauxite production showed a steep decline.

According to released results, Rusal produced 878,000 metric tons of aluminium in last year’s fourth quarter, which is a four percent decrease quarter-over-quarter, but unchanged year-on-year. Rusal sold 876,000 metric tons in the fourth quarter, which is down 6.7 percent quarter-on-quarter. The firm chalks up the decline to a higher level of sales in the previous quarter, both domestically and abroad, and an increase in inventory in transit for the quarter that are scheduled to be delivered in this quarter.

The share of value added products in Rusal’s overall aluminium portfolio was 44% in the fourth quarter. The realized price fell by 6.2% quarter-on-quarter, ending up at US$1,729/metric ton, which Rusal says matches the overall decline in the metal’s price. The firm produced 3,603 thousand metric tons last year, identical to the year previous, but they sold 3,638 thousand metric tons, which was up 3.2% year-on-year. That was good for a 43% share of VAP in the portfolio on the year.

The average realized price for aluminium was US$2,001 per metric ton, with a fall year-on-year reflecting the overall decline in values at 9.8%

As to aluminium’s precursor alumina, Rusal produced 1,906 thousand metric tons, which is up 1.9% quarter-on-quarter. The firm says its international operations, including Aughinish, Nikolaev, Windalco and JV Queensland, accounted for 66% of the year’s production. Rusal credits internal demand for the slight growth. Production of alumina for 2015 was up 2.0% year-on-year at 7,402 thousand metric tons.

Bauxite production for the quarter fell by 13.4% quarter-on-quarter to 2,850 thousand metric tons. Rusal chalks up the decline to seasonal factors. Inventories were built up in the quarter previous in anticipation of weather issues. Production at the firm’s foreign assets during the fourth quarter dropped slightly by 1.4% quarter-on-quarter, ending up at 1,713 thousand metric tons. Production at Windalco and Bauxite Company of Guyana were also down due to weather.

After several years of oversupply in the market, in 2016 Rusal expects there to be 1.2 million metric tons global aluminum market deficit, compared to the 0.6 million metric tons of surplus in 2015. This can be partially attributed to the 1 million metric tons of ex-China production that was cut in 2015, and another 0.5 million metric that will be cut in 1H of 2016, which is predicted to maintain a strong 2 million metric tons deficit from 2016-2020.

Additionally, due to China’s 2015 4th quarter  aluminium production cuts, with total closures of 4.4 million metric tons/year in 2015, aluminium production began to decline in December 2015 by -8.7% month-on-month. According to Rusal’s deputy CEO, Oleg Mukhamedshin, Chinese production slowdowns and the decreased growth in new capacity, illustrates an improvement in supply discipline in China. In 2016 China will increase new capacity by 3 million metric tons while also closing around 1.5 million metric tons, indicating that new capacity growth will be much lower in 2015-2016, relative to the last 5 years. 

Rusal states that global aluminium demand for 2015 increased by 5.6% year-on-year to 56.4 million metric tons. Demand for aluminium is expected to grow further in 2016, with Rusal predicting a steady 5.7% growth to 59.5 million metric tons, largely as a result of strong demand growth ex-China in North America, Europe and Asia, while Chinese demand growth is estimated at a healthy 7% year-on-year. Oleg Mukhamedshin confirmed the general industry consensus that “consumption of aluminium is still quite healthy […] which is actually as a result of substitution of other materials by aluminium”.