Russian Federation aluminium titan U.C. Rusal released third quarter operating results on Friday. Despite a weak global market for aluminium, the firm reported a rise in both overall aluminium sales and value-added aluminium sales.
In the just-ended quarter Rusal produced 942 thousand metric tons of primary aluminium, up by 0.4 percent on the quarter. Siberian smelters led the charge in the quarter, making up 93 percent of the total. Aluminium sales in the quarter totaled 1,091 thousand metric tons, an increase of 0.8 percent over the previous quarter, with value-added sales increasing by 3.9 percent to 430 thousand metric tons. Rusal has increased its value-added sales percentage to 40 percent in the third quarter, in part thanks to a rebound after the end of sanctions placed upon it by the United States government.
The third quarter saw Rusal increase alumina production, refining 1,957 thousand metric tons in the quarter, up by 2.1 percent over Q2. Meanwhile, bauxite production fell by 6.9 percent in the quarter to 3,948 thousand metric tons, and nepheline ore production dipped by 11.1 percent on the quarter to 1,017 thousand metric tons.
Rusal noted that the global marketing PMI increased by two-tenths of a percent to 49.7 percent last month, marking the first time the metric has seen two consecutive months of growth since 2017. Global manufacturing is still stunted, however, as evidenced by a sub-50 percent PMI. Despite increased manufacturing in developing economies (especially that of India), Rusal noted an overall slowdown globally, punctuated by both the United States and the Eurozone turning in slower rates than the prior quarter.
Thanks to the slowdown in manufacturing, Rusal says a corresponding drop in demand for aluminium resulted. Globally, demand for aluminium essentially flatlined for the first nine months of the year, holding steady at 49.5 million metric tons. Subtracting the People’s Republic of China from the mix, demand fell by 1.5 percent on the year to 21.9 million metric tons. China saw domestic aluminium demand rise by 1.4 percent on the year to 27.6 million metric tons over that same time period.
Meanwhile, Rusal notes the ex-China capacity growth over the year to date increasing by 1.9 percent on the year to 20.9 million metric tons per annum. Such growth lacking an increase in demand is more than sufficient to depress aluminium prices at the LME and elsewhere, they observe.
On the whole, the ex-China aluminium market was in a deficit of 1 million metric tons in the first nine months of the year, says Rusal. Fully 18 percent of all ex-China capacity is loss-making, even with a drop in raw materials costs. Though production cuts by Chinese smelters in the quarter may alleviate some of that downward pressure, such a situation continuing without production cuts is expected to hold LME aluminium prices at low levels, forecasts Rusal.
As to China, Rusal notes a fall in operating capacity through September from 36.6 million metric tons per annum last year to 35.7 million metric tons as of the end of last month. Thanks to production disruptions and closures in Shandong, Rusal estimates China’s nine-month aluminium smelting total to stand at 26.7 million metric tons, off by 1.7 percent on the year. Domestic aluminium stocks continued to slide in the period, falling from 1.05 million metric tons at the end of the second quarter to 945 million metric tons at September’s end.
For the first nine months of the year, Rusal says Chinese producers exported 4.4 million metric tons of unwrought aluminium, better by 2.9 percent on the year. The rise was largely the result of growth from January through May, as increases slowly fell off from June through September. China’s exports grew more slowly in the first nine months, increasing by 2.4 percent through September, down from a 5.3-percent jump observed for the year through August.