In recent months, Russia has increased imports of alumina, its main aluminum raw material, from India to supply its vast Siberian factories. This strategic move allows Russia to diversify its supply sources, reduce its dependence on China, and reduce production costs.
Russia's alumina supply is in short supply after a production facility in Ukraine was suspended following the conflict and Australia banned exports to Russia. While Russia maintains friendly relations with China, the surge in Chinese aluminum production has limited the price flexibility of Russian alumina purchases.
Rusal, the world's largest aluminium producer outside China, needs to bridge this supply gap to maintain domestic production and protect margins in a challenging aluminium price environment. About 70 per cent of Rusal's alumina demand, equivalent to 5.5 million tonnes, was initially met by its alumina plants in Russia, Ireland, Jamaica and Guinea.
However, the loss of alumina deliveries in Ukraine and Australia has left Rusal dependent on increased imports from China and other Asian refineries, leading to a significant increase in costs. To mitigate these challenges, Rusal then diversified its alumina sources by securing supplies from India and Kazakhstan. The company expects the total cost of alumina in 2023 to be lower than in 2022.
According to Indian customs data, Russia was the second largest buyer of Indian alumina in the first half of this year, with 189,379 tonnes of alumina exported to Russia. The reason for the switch to Indian supplies is the difficulty in obtaining alumina from more developed countries.
India's state-run National Aluminium Corporation (NALCO) is a major supplier of alumina to Russia, although NALCO did not respond to a request for comment. It is estimated that Russia will buy more than 350,000 tons of alumina from India in 2023, a figure that is in line with Rusal's forecast.
While China remains the third largest supplier of alumina to Russia, the availability of supply has decreased due to increased domestic aluminum production in China. In addition, Kazakhstan Aluminum, which produces 1.3 million tons of alumina per year, plans to reduce its supply to Russia by 5 percent in 2023 to meet its growing demand.
Rusal needs to source about 2.5 million tonnes of alumina annually from outside sources and relies on a variety of suppliers to meet its needs, including its Aughnish refineries in Ireland and Jamaica. However, these supplies are relatively small compared to the global alumina market. The global alumina market outside China is about 60 million tonnes, dominated by Australia.
Despite restructuring its raw material supply chain, Rusal still recognizes its heavy dependence on imported alumina. To mitigate these risks, the company has proposed a project to build an aluminum oxide plant in a Russian Baltic port, with the first phase expected to be operational by the end of 2028.
(www.profiles-aluminum.com; sales@profiles-aluminum.com).
