How the Russian conflict could affect Gladstone

Gladstone

Australian aluminium production could be affected by the Russia-Ukraine conflict if major aluminium company UC Rusal joins the growing list of Russian entities to be sanctioned.

UC Rusal owns or partially owns aluminium refineries, smelters and mines across five continents, including a 20 per cent interest in Queensland Alumina (QAL).

The QAL refinery (80 per cent owned by Rio Tinto) is near Gladstone and produces around 3.7 million tonnes of alumina every year.

Rio Tinto chief executive officer Jakob Stausholm said the situation looked serious but one a major company like his could manage.

“Specifically in our business, I think there could be disruption to primarily the aluminium industry,” Stausholm said as the company released its Annual Report for 2021.

“The advantage for Rio Tinto of having such a big aluminium industry is that we have an integrated supply chain from bauxite to alumina to final aluminium products, and that puts us in a very good position to meet our customer needs during times of disruptions.”

UC Rusal received sanctions in 2018, as the Russia-Ukraine conflict ebbed and flowed, but this time around could be much worse, as has been reported previously.

The company’s Australian alumina product represents 9 per cent of its total output, while the Gladstone refinery is one of Australia’s largest.

Wood Mackenzie aluminium team principal analyst Ami Shivkar said potential sanctions would certainly affect the flow of Australian aluminium.

“As a result of sanctions, should counterparties be unable to transact with UC Rusal as was the case in 2018, then there is a risk that all of UC Rusal’s overseas alumina assets could be impacted,” Shivkar said.

“In this scenario output from Aughinish, UC Rusal’s Jamaican refinery and its stake in the Australian Gladstone plant could be stranded and ultimately jeopardised.

“Any significant reduction in alumina production would impact primary metal output in short order leading to even greater primary aluminium market deficits.”

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