Rusal

United Company RUSAL Plc
Public limited company
Traded as MCX: RUALR
SEHK: 0486
Euronext: RUSAL
Industry Mining
Founded 2007
Headquarters Moscow, Russia
Key people
 Oleg Deripaska (CEO)
Mattias Warnig (Chairman)
Products Aluminium
Aluminium alloys
Bauxite
Alumina
Revenue Decrease US$10.8 billion (2012)
Decrease - US$55.0 million (2012)
Number of employees
 72,202
Website www.rusal.ru

United Company RUSAL (Russian: ОК РУСАЛ, /OK RUSAL/) is the world's second largest aluminium company. It was the largest until overtaken by China Hongqiao Group in 2015.[1][2] UC RUSAL accounts for almost 9% of the world's primary aluminium output and 9% of the world’s alumina production. The United Company was formed by the merger of RUSAL (Russian: Русский алюминий), SUAL, and the alumina assets of Glencore, completed in March 2007. The company operates in 19 countries over five continents and employs over 72,000 people across its international operations and offices.[3] The company is incorporated in Jersey, where it has its financial centre, but its headquarters are in Moscow, Russian Federation.

History

RUSAL is the global leader in the aluminium industry and accounts for approximately 9% of global aluminium production and 9% of the world’s alumina output. It has played a decisive role in the consolidation of the Russian aluminium industry during its establishment as a large, vertically integrated aluminium holding.

1930-1980

The Russian aluminium industry dates back to 1932, the year when the Volkhov aluminium smelter produced the first batch of aluminium. Following that, construction of smelters began to meet the growing demand of the national economy. During WW2, the production facilities in the country were evacuated to the Urals and Western Siberia, and the relocated equipment was used to build the Bogoslovsk and Novokuznetsk aluminium smelters. In the 1950s, new aluminium smelters were built for strategic purposes in Kandalaksha, Nadvoitsy and Volgograd. In the 1960s and 1970s, smelters in Irkutsk, Krasnoyarsk, and Bratsk were constructed in close proximity to the largest hydro power plants in Siberia. By the early 1980s, Russia was the world’s second largest producer of aluminium after the US.

Russia has been historically short of bauxite, which is used to produce alumina, the main raw material in the aluminium production process. Due to the weak development of raw materials production in Russia, and amid growing aluminium output, the domestic producers were forced to purchase alumina from other countries like Guinea and India.

1990-2000

In the early 1990s, as Russia was going through market reforms, its aluminium industry was hit hard by the economic downturn and the political uncertainty that the country experienced in the years following the collapse of the USSR. The ‘shock therapy’ economic measures mostly hit the defence and engineering industries, the key consumers in the Russian aluminium sector. Alumina refineries in Ukraine, Kazakhstan, and Azerbaijan became foreign operations located in the independent countries, while Russian production facilities were only able to meet 40% of business demand for raw aluminium materials. Following the collapse of the USSR, the lack of raw material sources, the closed nature of the Soviet economy and poor ties with global alumina producers jeopardised the aluminium industry in the country. By 1994, aluminium consumption in Russia fell to around 2 kg per capita, compared with 17 kg per capita in 1990. The only way the industry could survive was to re-orient itself towards external markets; and so in 1992 export of aluminium exceeded 1 mln tonnes for the first time.

In 1993, the Russian government launched the privatization of the aluminium industry. International traders who obtained access to Russia’s largest aluminium smelters during the privatisation were not interested in developing the sector and did not invest in production, opting for immediate profits instead. This period in Russian business history is now known as the "Aluminium wars." [4]

Russian businessman Oleg Deripaska started his business as a commodities agent and broker at the Moscow Trade Stock Exchange (Moskovskaya Tovarnaya Birzha (MTB)) and then at the Russian Commodities and Raw Materials Exchange (Rossiyskaya Tovarno-Syryevaya Birzha (RTSB)), dealing in a wide range of commodities, including aluminium. His work included trading with major Russian aluminium smelters. Between 1991 and 1994, companies set up by Mr. Deripaska with the backing of Michael Cherney started investing in the shares of Sayanogorsk Aluminum Smelter (SAZ), one of the newest and most modern aluminium plants built in Soviet times (1980–1985). In 1994, Mr. Deripaska was elected the General Director of SAZ.

Since then, gradual strategic acquisitions and growth projects have led to the creation of the world’s largest aluminium and alumina producer, based on production in 2008. RUSAL has historically adopted the policy of fully integrating assets it acquires and controls under centralised operational and management control. The company has achieved increased production and efficiency in most of its acquired facilities through so-called production “creep” (improvements achieved through targeted improvements to key processes), as well as by undertaking key modernisation and expansion projects.

In 1997, as part of a general restructuring of the companies controlled by Mr. Deripaska, Sibirsky Aluminium was established to manage aluminium and alumina assets acquired by companies related to Mr. Deripaska. By 2000, Sibirsky Aluminium managed, among other aluminium-related assets, majority interests in the Sayanogorsk aluminium smelter, the Sayanal foil mill, a fabricating plant in Samara, Russia, and a minority interest in the Nikolaev alumina refinery in Ukraine.

2000-2010

In 2000, Sibirsky Aluminium and Millhouse Capital agreed to manage jointly the aluminium and alumina assets they controlled and founded RUSAL. By 2002, Sibirsky Aluminium and Millhouse Capital were managing controlling stakes in the Armenal foil mill in Armenia and the Belaya Kalitva metallurgical plant and Novokuznetsk aluminium smelter in Russia, and also took under management the Friguia bauxite and alumina complex and Bauxite of Kindia Company in Guinea to secure bauxite and alumina supply for its Russian smelters.

In 2003, companies related to Mr. Deripaska increased their stake in those companies under common management to 75% by acquiring half of the interest managed by Millhouse Capital. In Ukraine, RUSAL increased its share in the Nikolaev alumina refinery to 98%.

In 2004, the consolidation of RUSAL’s ownership by companies related to Mr. Deripaska was completed with the acquisition of the remaining 25% equity interest in RUSAL managed by Millhouse Capital. At this time, RUSAL made the strategic decision to focus on the upstream business and began disposing of its downstream assets, including the sale of its fabricating division to Alcoa in January 2005. This divestiture process was largely completed in 2006 with the distribution of certain aluminium construction plants and other non-core assets to companies controlled by RUSAL’s beneficial owner.

Having completed integration in Russia, RUSAL still required additional sources of raw materials, and so it began an active international expansion. Within four years after its creation, RUSAL had established its presence on all five continents and included Guinea, Australia, Guyana, China, and Nigeria in its geographical portfolio.

From 2004 to 2006, RUSAL acquired several strategically important assets. In 2004, RUSAL acquired a 90% interest in the Boxitogorsk alumina refinery in Russia and increased its holding in the Nikolaev alumina refinery to 100%. In 2005, RUSAL bought a 50% stake in the Komi alumina project from SUAL and became its partner in the project, which involved the construction of an integrated bauxite and alumina complex in Russia’s Komi Republic. In the same year, RUSAL completed the acquisition of a 20% equity interest in one of the world’s largest alumina refineries in terms of production capacity, Queensland Alumina Limited, located in Queensland, Australia. RUSAL’s joint venture partner in Queensland Alumina Limited is Rio Tinto.

In 2005, RUSAL purchased assets of a cathode plant in Lingshi County of Shanxi Province, China. In April 2008, the company acquired assets of another cathode plant in Taigu County of Shanxi Province, China, which have been integrated into the existing cathode plant in Lingshi.

In 2006, RUSAL acquired assets of the state-owned Aroaima Mining Company in Guyana,[5] acquired the remaining equity interest in the Friguia bauxite and alumina complex in Guinea, completed an extensive retrofit of the Armenal foil mill and commissioned the Khakas aluminium smelter in Russia — one of the most advanced aluminium production facilities in the world. RUSAL also acquired a 56.16% equity interest in the Italian alumina refinery, Eurallumina.

In May 2006, RUSAL and RusHydro signed a co-operation agreement for the construction of the Boguchanskaya hydropower station (HPP) and the Boguchansky aluminium smelter. RUSAL increased ownership in the Bratsk, Krasnoyarsk, Sayanogorsk, and Novokuznetsk aluminium smelters, the Achinsk and Boksitogorsk alumina refineries and the Russian National Aluminium and Magnesium Institute (VAMI) to 100% in November 2006, and in Sayanal in June 2007.

Long-term competitiveness is impossible without a solid in-house research and design platform. The VAMI and SibVAMI aluminium and magnesium research institutes became the backbone for engineering and technology centres involved in the development of new unique production technologies including RA-300 and RA-400 reduction cells for RUSAL. The new technologies allowed for large-scale greenfield and brownfield projects. In 2005, RUSAL created its own engineering and construction subsidiary responsible for modernisation and construction projects.

In December 2006, RUSAL acquired through a privatisation process a 77.5% equity interest in the Aluminium Smelter Company of Nigeria (ALSCON). The Group acquired a further 7.5% equity interest in ALSCON from MAN Ferrostaal AG in January 2008.

In late March 2007, the merger between RUSAL, SUAL and alumina assets of Glencore created UC RUSAL including 16 aluminium smelters, 12 alumina refineries, eight bauxite mines, three powder metallurgy plants, three silicon smelters, three secondary aluminium plants, three aluminium foil mills, two cryolite plants, and one cathode plant. This transaction completed the 15-year process of consolidating the Russian aluminium industry, and created the world’s largest aluminium producer (based on production in 2008) with operations in 19 countries across five continents and more than 75,000 employees.

In 2008, RUSAL produced 4.4 million tonnes of aluminium and 11.2 million tonnes of alumina. In November 2007, RUSAL signed a cooperation agreement with Samruk-Energo, a subsidiary of Samruk-Kazyna, on the creation of a 50/50 joint venture in respect of the operation of the Bogatyr Komir LLP, the largest coal mining company in Kazakhstan, with an annual production of approximately 40 million tonnes of coal, that ensured stable fuel supply to Urals thermal power stations that provide electricity for RUSAL’s Urals plants.

In April 2008, the Group completed the acquisition from Onexim of a 25% plus one share equity interest in Norilsk Nickel, the world’s largest nickel and palladium producer. The acquisition allowed the Group to diversify its asset base. The consideration for the shares in Norilsk Nickel was partially paid in cash and partially in shares. This strategic transaction paved the way to develop RUSAL into a global, diversified metals, mining and energy group. [6]

As of December 2009, En+ Group owns a 53.35% stake in the United Company, SUAL’s shareholders hold 17.78%, 19.46% is owned by ONEXIM, and the remaining 9.70% is owned by Amokenga Holdings, a wholly owned subsidiary of Glencore.[7]

In January 2010, RUSAL was listed on the Hong Kong Stock Exchange with its IPO price of HK$10.8[8] per share and capital raising of US$2.6 billion. The IPO attracted a list of big-name investors including Nathaniel Rothschild, Robert Kuok, Paulson & Co, John Paulson and Vneshekonombank.[9][10]

From 2010

In the wake of the 2014 Crimean crisis, when the US threatened to impose sanctions on undetermined persons and businesses in Russia, and contemporarily with the Chinese slowdown, Rusal suddenly declared on 28 March 2014 that it lost US$3.2bn and had non-cash losses of US$1.9bn. The company asked creditors to agree to delay payments on part of its US$10bn net debt pile.[11]

Operations

Russia

Rusal owns and operates six aluminium smelters, two alumina refineries and two foil rolling mills in Russia:

A new Boguchany Aluminium Smelter is currently under construction, expected to be launched in 2012.

Armenia

Australia

Guinea

Guyana

Ireland

Italy

Montenegro

Nigeria

Sweden

Ukraine

See also

References

  1. ↑ "China Hongqiao Group Surpasses Rusal be the Largest Aluminum Producer". alu.com.cn.
  2. ↑ Martin Ritchie (31 August 2015). "Hongqiao Gets to Top of the World and Sinks Most Since IPO". Bloomberg.com.
  3. ↑ "RUSAL". Retrieved 27 May 2015.
  4. ↑ "Oleg Deripaska and the Russian aluminium wars". European CEO magazine. 24 January 2012. Retrieved 20 May 2014.
  5. ↑ "BCGI (Bauxite Company of Guyana Inc.)". BNamericas Latin America. Retrieved 20 May 2014.
  6. ↑ "Страница не найдена". Retrieved 27 May 2015.
  7. ↑ "Страница не найдена". Retrieved 27 May 2015.
  8. ↑ Shares of Russian aluminum giant UC Rusal slide in Hong Kong trading debut
  9. ↑ "UPDATE 4-RUSAL goes public in pursuit of $2.6 bln". Reuters. Retrieved 27 May 2015.
  10. ↑ Nisha Gopalan (30 December 2009). "Rusal IPO Draws Initial Investors". WSJ. Retrieved 27 May 2015.
  11. ↑ "Rusal warns on $10bn debt pile as losses reach $3.2bn". Financial Times. Retrieved 27 May 2015.
  12. ↑ "Profits plunge 80pc at Aughinish Alumina". Irish Independent. 8 October 2012. Retrieved 11 May 2013.

External links

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