"Rusal" accounts for about 14% of aluminum production outside of China, with the bulk of the company exporting to Europe and North America, and metal sales to these markets, bypassing sanctions, are almost impossible. At the same time, sanctions can hit the supply of raw materials to Russia from foreign enterprises of Rusal. It is difficult to reorient export volumes to the domestic market - the demand for aluminum in Russia can grow significantly only in the long term. Anatoly Jumailo, Nikolai Zubov and Yuri Barsukov could understand how the business and production structure of a company can look like while preserving the sanctions.
The world market without "Rusal"
Rusal accounts for about 6% of world aluminum production (3.7 million out of 63.5 million tons in 2017) and 14% of its output outside of China. About 80% of aluminum, "Rusal" exports, so sanctions against him caused panic in the market. Spot prices for aluminum at LME soared in mid-April to $ 2.6 thousand per tonne due to fears of a deficit, but returned to a level of about $ 2.2 thousand per ton, when it became clear that En + was working with OFAC on the withdrawal of the group from -for sanctions.
The interlocutors of Kommersant in the industry disagree in assessing how the absence of Rusal will affect the market in the long term. About 45% of shipments go to Europe, 20% - to North America, that is, to regions that can not ignore US sanctions. And in the moment (albeit not fast), only China, with which the United States is also going through a tough trade war, can replace Rusal. The Aluminum Association of the Russian Federation notes that it will be possible to expect a partial transfer to the United States (net importer of aluminum, imports 4.5-5.2 million tons per year, of which 10-14% was provided by RusAl) of metal, which is now sold in EU, but the net deficit there already exceeds 5 million tons per year. Partly replenish the volume in the US will help restart five local plants. It was planned back in 2017, ahead of the introduction of import duties on aluminum (in March, announced at a rate of 10%). But in 2018, according to sources from Kommersant, aluminum production in the US could grow by only 20%, to 900,000 tonnes, to 1.6 million tonnes by 2020, but even then imports will not replace it.
In the West, there are almost no ready-to-restart facilities - this is a slow, complex and expensive process, for which we need confidence in the installation of a new market balance for a long time, the source of Kommersant in the mining and metallurgical company stresses. Another source of Kommersant adds that the operating capacity in most cases is fully loaded.
China in May continued to increase output (up to 2.8 million tons) and exports (up to 485 thousand tons). But that he replaced the Russian Federation, we need agreements with Western countries, which in recent years, on the contrary, have been purposefully defended against the influx of Chinese imports, Kommersant's interlocutor notes among the metallurgists. In addition, he adds, sometimes it will be technologically difficult to replace Rusal: it is a question of specific products with added value, made for the needs of specific consumers. The Aluminum Association confirms: "In Europe, each alloy of an individual supplier is qualified by the end user, and the qualification of a new supplier, alloy or production unit can take up to a year."
But a number of Kommersant sources admit that other players can replace Rusal in the world market with other players, including quickly: only about 4.5 million tons of current storage reserves outside the PRC will last for two months of consumption of the world (without China) . At the same time, if the sanctions are lifted, Rusal will not easily return, one of Kommersant's sources warns: the company risks losing the trust of some clients, investors and financial institutions. At the same "Rusal" in this situation there are two ways out: either ask for state support, or decrease in size.
What can the state "Rusal" help
Since the introduction four years ago of the first sanctions, the individuals, physical and legal persons who fall under them, count on state support and receive it. Among the options for saving "Rusal" almost immediately was called the most linear - nationalization. On the possibility of this, for example, the head of the Ministry of Industry and Trade Denis Manturov said. But he, and Finance Minister Anton Siluanov assured that there were no substantive discussions. Sources "Kommersant" called the option unrealistic and simply meaningless, since it would not have solved the problem of sanctions exactly.
Other ways to help Rusal were discussed a few years ago: in 2013, when the company shut down factories in the central part of the Russian Federation due to falling aluminum prices, it asked the government to create an aluminum fund for public procurement of metal (about 1 million tons). The idea was discussed, but it was not realized. Sanctions forced her to return. A senior official said at the end of May that Oleg Deripaska again asked the state to purchase aluminum, "the government thinks." According to Denis Manturov, while the issue "on the agenda is not worth it", as "Rusal" can freely trade until the end of October. But the minister promised to return to the discussion of the idea, "if there are complications."
Avoid complications "Rusal" the state can help through state-owned banks. The company's net debt was $ 7.8 billion at the end of the first quarter, with Sberbank accounting for two-thirds (25% of MMC Norilsk Nickel is pledged as collateral) and VTB. The head of the Savings Bank, German Gref, officially does not say anything about indulgences: he has already promised to "work with a mortgage" if the company can not pay off. But to extinguish this loan, "Rusal" is needed only in 2021-2024. But VTB, according to its head Andrei Kostin, is ready to give "Rusal" a reprieve. These same state-owned banks are among the main creditors of the energy company Oleg Deripaska Eurosibenergo (net debt at the end of 2017 - $ 5.5 billion).
A source in the government said that Rusal appealed for support to Promsvyazbank, which works with the defense industry and the sanctions companies. "Renova" Viktor Vekselberg, the bank has already helped by providing money to refinance loans in Western banks. Details were not disclosed, but Renova asked the government to refinance Western banks loans worth € 820 million against a 26.5% stake in Rusal.
Is it possible to reduce "Rusal"
Rusal, which in the mid-2000s was sometimes called the "aluminum empire," includes 41 enterprises on five continents. So, the operating bauxite mines and alumina refineries of the company in addition to Russia are located in Guinea, Guyana, Ireland, Jamaica and Ukraine, in addition, there is a "Rusal" and 20% in Rio Tinto alumina refinery QAL in Australia.
Sanctions against Rusal caused panic not only among consumers of the company, but also from the authorities of these countries, the latter seriously discussing options for the company's exit from local assets.
So, the Deputy Minister of Trade of Sweden, Oskar Steenström, told Kommersant in late May how he wrote a letter to OFAC asking him to allow some time for the aluminum plant of "Rusal" Kubal "to be able to deal with their current affairs". "We will do everything possible to keep Kubal working. I very much hope that Kubal will decide the issue with the share of Oleg Deripaska's ownership in accordance with the OFAC rules, "the official explained. And answering the question "Kommersant", whether he expects that Oleg Deripaska will lose control of the asset, Oskar Steenström replied positively: "Yes. Something has to change in order for Kubal to survive, as we now believe. A couple of weeks ago, the plant was very close to closing. " Reuters, with reference to the source, reported that the Irish government also considered "options to agree on the change of owner or management of the plant Aughinish Alumina", but eventually decided not to interfere in the situation directly.
The source of Kommersant in the industry is confident that Rusal will not get out of foreign assets, since in that case it will remain without raw materials, but a change in the ownership structure is quite possible.
It is unrealistic to split the existing raw material chain, as well as the structure of "Rusal" as a whole, agrees Oleg Petropavlovski from BCS. But in theory, he adds, if RusAl split into separate assets with different owners, the company's aluminum plants would still be effective. In 2017, the cost of aluminum production by RusAl was $ 1.5 thousand per tonne, which is comparable to the UAE and Canada (about $ 1.6 thousand) and much lower than the cost of production in China and India ($ 1.73-1.77 thousand .).
Ways of circumvention of sanctions
According to the estimates of the analytical agency CRU, sanctions against "Rusal" will narrow its markets to Russia and the CIS, Turkey, South Korea and in general Southeast Asia. Analysts substantiate this conclusion, in particular, by the fact that Turkey, China and South Korea managed to buy Iranian oil even when the country was under US and EU sanctions. However, sources of Kommersant are clarifying among the oil workers, serious operational problems could not be avoided in that situation anyway. For example, Iranian companies could not obtain Western insurance for cargo and tankers. The latter were excluded from international registers, they lost certification service. To own tankers of the state NITC in such conditions it was difficult to transport cargoes even in rather friendly China.
As a result, Iranians resorted to the services of intermediaries: the transfer of oil from an Iranian tanker to a "neutral" vessel occurred at sea, without calling at the Iranian port. The mediator in this situation is not formally connected with Iran and therefore can receive insurance, etc. So, in February 2013 Reuters wrote about the Greek businessman Dimitris Kambis, who bought eight old supertankers for about $ 200 million (only twice as much as scrap metal weight) and supplied them with oil from the Persian Gulf to China. The businessman himself participated in the scheme with Iranian oil denied. According to Kommersant's sources, sometimes owners of tankers officially bought a small amount of oil in other countries of the Persian Gulf, and then they "topped up" the tanker with Iranian oil.
According to Bloomberg, Rusal has already negotiated with Chinese traders and aluminum companies, offering to buy alumina in China and sell metal. But Chiang's senior vice president Jiang Jing said at the end of April that the corporation "has no opportunity to work with Rusal." Chinese manufacturers themselves suffer from protective duties around the world. Pressure on exporters of primary aluminum and power: stimulating the development of processing, China reimburses VAT on the export of aluminum semi-finished products and products, and imposes duties on the export of metal.
At the same time, aluminum companies outside of China, including Rusal and Alcoa, complained that in 2014-2016 there was an excess of so-called fake semis on the market - a slightly processed metal that brings tax benefits to exporters and is intended for remelting in the aluminum billet, which is not subject to protective duties in the importing countries. The American media widely covered the history of warehouses in Mexico with reserves of more than 1 million tons and remelting capacities in Vietnam, Malaysia and even New Jersey, attributing the scheme to China Zhongwang Holdings, against which the US Department of Commerce started an investigation. The company itself and China's Nonferrous Metals Industry Association denied the involvement of the Chinese manufacturer in these facilities. As ING analysts noted in April, "fake semi-finished products" are still on the market, but there are fewer.
Thus, Rusal has, in fact, two ways - to look for new, gray or white export schemes or to seriously take up the development of the domestic market.
Who can sell the sanctioning aluminum
Rusal does not comment on the impact of sanctions on production, in official reports to investors, the possible negative consequences of the actual stop of export sales are mentioned only in general terms.
May transport statistics OAO RZD showed an increase in export shipments of metal from the plants of "Rusal" in comparison with April (197 thousand against 76,7 thousand tons). As noted by Bloomberg sources, these figures primarily relate to the volumes going to port warehouses, and exports may be lower. But the export of primary aluminum from Russia in April, according to the Federal Customs Service, was even greater than its transportation from the factories of "Rusal": 197 thousand tons to $ 326 million.
The interlocutor of Kommersant among metallurgists believes that Rusal is "aimed at transparent sales of aluminum" and to the last will avoid ambiguous trading schemes. "Even if the sanctions are not lifted by the fall, the company should retain the reputation of a player who does not violate the rules, in order to have the chance to convince OFAC and return to traditional markets," he said.
In addition, the gray schemes, according to the source, "Kommersant", can give a very limited market, mainly in Asia, where there are small aluminum processors and capacity for remelting. However, he clarifies, their pigs and semi-finished products will not be in demand by stock exchanges and large consumers in Japan and Europe, which monitor the legal purity of supplies.
Another source at Kommersant says that the extension by the US Treasury of the timing of the completion of trade contracts with Rusal until the end of October largely removed the tensions of buyers and the company continues to supply aluminum to traditional customers - in dollars and on prepayment. Have the supplies of Glencore resumed, which accounted for about a quarter of Rusal's sales (the trader does not disclose it), the interlocutor of Kommersant does not know.
Mitigate the export problem may reduce the production of "Rusal". According to CRU analysts, shipments of bauxite and alumina to Russia from most of the company's foreign operations may be suspended, which will lead to a sharp reduction in aluminum output by the company - up to 2.3 million tons in 2019 against 3.7 million tons in 2017 (according to the current forecasts are not given).
How much aluminum can Russia need?
With the preservation of sanctions, Rusal can make a bid and increase sales in Russia and the CIS. The company has long declared the need to stimulate the processing of metal in the domestic market, and the Aluminum Association, created by the industry participants led by Rusal, is actively lobbying for changes in the legislation with regard to expanding the scope of aluminum application and setting up barriers to the import of processed products.
The consumption of aluminum in Russia and the CIS in 2017 increased by 11%, to 1 million tons. More than 90% of demand falls on the Russian Federation, it is satisfied to the same extent by "Rusal" (primary aluminum in Russia is also supplied by the Kazakhstani electrolysis plant Eurasian Resources Group).
In the spring of 2016, at a meeting with Premier Dmitry Medvedev, Oleg Deripaska said that under the leadership of the Ministry of Industry, a working group had been set up that had developed a program to increase aluminum processing in Russia to 2.1 million tons by 2021 and to 2.5 million tons by 2024. According to calculations, this should create more than 70 thousand jobs, more than double the export earnings of the industry and aluminum consumption in Russia (up to 18 kg per person). The businessman indicated that the main directions for the implementation of the program are the development of rolling capacities, transport engineering, cable products, an increase in aluminum consumption in construction and the consumer sector. But the program is expensive - 140 billion rubles., Mr. Deripaska noted, and "there is a question of financing consumers who are ready to increase the volumes of output."
The potential of import substitution "Rusal" was estimated at about 500 thousand tons per year (in terms of primary metal, the annual import of aluminum products in Russia was about 750 thousand tons). But sanctions can definitely hinder the implementation of this large-scale program in the development of aluminum exports from Russia: it will be difficult for exporters to find foreign buyers who are not afraid to fall under the "secondary" sanctions of the United States.
There are problems with domestic consumers from the production controlled by American investors: the Russian factories of the ball packing company Ball and the Samara plant Arconic continue to use aluminum Rusal only with the permission of OFAC.