27.07.2020

RUSAL announces second quarter operating results

Moscow, July 27, 2020 - RUSAL (SEHK: 486; Moscow Exchange: RUAL), a leading global aluminium producer, announces its operating results for the second quarter 2020(“2Q20”).

 

Key highlights

 

Aluminium

•       Aluminium production in 2Q20 totaled 927 thousand tonnes (-1.4% quarter-on-quarter (“QoQ”)), with Siberian smelters representing 93% of total aluminium output;

•       In 2Q20, aluminium sales amounted to 976 thousand tonnes (up 6.8% QoQ). During this period, sales of value added products (VAP) decreased by 14.0% QoQ, to 363 thousand tonnes, demonstrating a decline of VAP share in total sales mix to 37% (vs 46% in 1Q20) due to the COVID-19 pandemic;

•       In 2Q20 on the back of diversified client base, the Company successfully adjusted the regional sales geography in line with the new environment on the markets caused by COVID-19. European destination still dominates the mix, however it decreased in share to 46% (-9pp QoQ), while Asia’s share grew to 27% (vs 15% in 1Q20). This shift reflects less severe lockdown measures in Asia and one-off arbitrage opportunity in China;

•       In 2Q20, the average aluminium realized price decreased by 11.3% QoQ to USD1,654/t. The decrease was driven both by London Metal Exchange (“LME”) QP component (-10.7% QoQ to USD 1,526/t) and average realized premium component (-17.9% QoQ to 128/t). The decline in premiums during 2Q20 is attributed to the decrease of VAP share in product sales mix and overall market conditions related to the pandemic.

 

Alumina

•       In 2Q20, total alumina production was almost flat QoQ, at 2,009 thousand tonnes. The Company’s Russian operations accounted for 35% of total output.

 

Bauxite and nepheline ore

•       In 2Q20, bauxite production increased by 8.8% QoQ, to 3,892 thousand tonnes. The growth was driven by an increase in output at Timan due to low comparison base of 1Q20, affected by seasonal factor. Nepheline production increased by 9.0% QoQ, to 1,181 thousand tonnes.

 

Market overview

•       According to the JP Morgan Global Manufacturing PMI, global manufacturing activity increased from 42.4 in May to a 5-month high of 47.8 in June. It is still below 50 points, thus indicates contraction, but at a softer pace. Manufacturing conditions continued to recover all over the world following the severe disruption caused by COVID-19. While in the US, Brazil, France, Turkey and China manufacturing production expanded at a several months’ highest rates, other national economies experienced slower declines. Although a potential second wave of COVID-19 continues to cause some uncertainty in the market, most countries are more optimistic towards 2H 2020.

•       In 1H 2020, the global primary aluminium demand was down by 6.6% year-on-year (“YoY”) to 30.3 million tonnes. Ex-China demand contracted by 15.4% to 12.3 million tonnes, while Chinese demand remained almost unchanged and shifted by a mere 0.5% to 18 million tonnes.

•       Global aluminium production in 1H 2020 grew by 1.8% to 32.1 million tonnes, including the Rest of the World (“RoW”) growth at 0.5% YoY to 13.9 million tonnes. In China, a 2.8% growth YoY to 18.2 million tonnes was seen for the same period. Overall, the global market was in surplus of 1.8 million tonnes during 1H 2020.

•       With regards to cost curve, still around 12% of smelters in the RoW operate at a loss. Approximately 3.5 million tonnes of capacity outside of China operate with costs above current prices. Since the beginning of this year, around 0.6 million tonnes of RoW capacity was curtailed.  

•       Operating capacity in China reached 37.2 million tonnes. Chinese unwrought aluminum and products exports collapsed by 20.6% in 1H20 YoY to 2.37 million tonnes on strongly negative export price arbitrage.

•       In 1H 2020, aluminium inventories at LME warehouses grew above 1.6 million tonnes, with an overall increase of 165 thousand tonnes compared to the level at the end of last year. LME live warrants grew to the level of 1.47 million tonnes. Chinese regional stocks continued to decline steeply in June 2020 and fell 960 thousand tonnes to 0.7 million tonnes from its highest level this year of 1.68 million tonnes as of the beginning of April 2020.



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