Alumina tends to be the least visible and analysed of the major commodities,perhaps because,historically,it was subsumed and barely visible as a discrete commodity within an aluminium industry supply chain that was dominated by integrated aluminium metal producers.
It was the emergence of China as a major aluminium producer and consumer,long on aluminium production but short on alumina,that saw the delinking of aluminium and alumina prices and the establishment of trading in alumina at prices set by reference to indices rather than the aluminum price.
Alumina prices have shown themselves to be very sensitive to events – the prices are volatile and respond quickly to any disruption to supply or change in demand because alumina can’t be stored for any length of time without deteriorating and aluminium smelters have to keep operating – so it isn’t surprising that the outbreak of the war in Ukraine has had an impact on a market where the supply and demand equation was reasonably tight anyway.
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While there are no direct sanctions on Russia’s aluminium industry —Russia’s is the world’s third-largest producer and Rusal the largest producing company outside China – its supply chain has been disrupted by the secondary effects of the sanctions and their impact on financing,access to equipment and,in Rusal’s case,an Australian ban on alumina exports to Russia. Rusal gets about 20 per cent of its alumina needs from its joint venture with Rio Tinto (80 per cent Rio,20 per cent Rusal) in Queensland.
A more direct consequence of the invasion has been the suspension of Rusal’s production at its Nikolaev alumina refinery in Ukraine amid reports that the rail and port infrastructure have been destroyed. Nikolaev is Rusal’s second-largest refinery,producing about 1.8 million tonnes of alumina a year,or nearly a quarter of its own aluminium smelters’ needs.
Rusal also has a 1.9 million tonnes per annum refinery in Ireland that sources its bauxite from Brazil (via Rio Tinto) and Guinea. Rio has halted sales to the refinery so Rusal,and the market,are going to be short of alumina.