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United Company RUSAL Plc: Third Quarter 2016 Trading Update

Thursday, Nov 17, 2016

This announcement is made by United Company RUSAL Plc (“UC RUSAL” or the “Company”) pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and applicable French laws and regulations.

Shareholders and potential investors are advised to exercise caution when dealing in the shares of UC RUSAL.

UC RUSAL announces its operating results for the third quarter 2016 (“3Q16”).


Aluminium production2 in 3Q16 totaled 920 thousand tons, with Siberian smelters representing 94% of total aluminium output. Smelters utilization remained on average at a high of 94%.

Operating data is based on preliminary data and can be updated in 3Q16 financial results.

Aluminium production represented by salable products output (the number include all facilities excluding Volgograd remelting).

3Q16 aluminium sales increased by 2.4% QoQ to 981 thousand tons. The value added products (VAP3) sales increased marginally, totaling 446 thousand tons.

In 3Q16 the average aluminium realized price4 increased by 2.5% QoQ to USD1,754/t largely driven by the London Metal Exchange (“LME”) QP5 component growth from USD1,550/t in 2Q16 to USD1,604/t in 3Q16. The realized premium decreased from USD162/t to USD150/t amid lower average commodity premium and higher volumes of commodity grades sales (including purchased volumes).

9M16 aluminium production totaled 2,756 thousand tons.

9M16 aluminium sales volumes increased to 2,896 thousand tons due largely to the additional volumes of the Boguchansky smelter, where the plant is currently operating in test mode. The average realized price in 9M16 was USD1,711/t . The average price reduction is explained by the structurally different market environment in 9M 2015 versus 9M 2016 and therefore lower aluminium LME prices and premiums YoY.


In 3Q16, total alumina production remained flat QoQ, totaling 1,865 thousand tons. Russian operations represented 36% of the total output, totaling 665 thousand tons.

 9M16 alumina output totaled 5,588 thousand tons. The production increase largely came from the Russian operations performance where output increased 3.9% YoY, amid higher utilization rates.


 In 3Q16, bauxite output totaled 3,211 thousand tons. The increase came largely from Russian bauxite mining assets performance at North

VAP includes alloyed ingots, slabs, billets and wire rod.

The realized price includes three components: LME component, commodity premium and VAP upcharge.

QP (quotation period) prices differs from the real time LME quotes due to a time lag between LME quotes and sales recognition and due to contract formula speciality.

Urals and Timan where subtotal output increased by 8.9% QoQ. Bauxite Company of Guyana production also increased in 3Q16 by 15.1% QoQ, amid completion of scheduled repairs that largely impacted previous quarter volumes. The rest of the bauxite operations showed a negative performance that was largely explained by the current production plan and scheduled repairs. The Alpart asset is currently under review ahead of completion of the disposal transaction and as such the operations are currently postponed. Nepheline ore6 production decreased by 6.1% QoQ to 1,135 thousand tons amid planned repairs at the facility.

In 9M16 bauxite output totaled 9,346 thousand tons. Nepheline ore output increased 9.3% YoY to 3,454 thousand tons.

Market overview

 The LME aluminium price rose to USD1659/t at the end of 3Q16, the highest level since mid-August 2016 and remains stable at a USD1600-1700/t level. This was attributable to the growing metal deficit, particularly in the U.S. and EU and continued slow production growth in China, coupled with strong growth in global manufacturing activity. Global reported aluminium inventories fell to 4.975 million tons in September, the lowest since January 2009, and to 29.9 days of consumption - significantly below than pre-crises level in August 2009 at 76.0 days of consumption, making aluminium best-positioned in the base metals universe. Aluminium premiums in the key consuming regions started to improve in the end of 3Q16, as supported by strong demand and improved metal financing conditions.

The PMI data in October 2016 supports stronger end user demand growth rates in the developed economies. The preliminary reading of Markit US Manufacturing PMI in October climbed to 53.2, its highest mark in a year, rising from 51.5 in September 2016. European manufacturing activity growth accelerated to a 10-month high as the Eurozone Composite PMI came to 53.3 in October 2016. The Nikkei Japan Flash Manufacturing PMI increased to 51.7 in October 2016, the sharpest improvement in nine months, after a final reading of 50.4 in September 2016.

Kiya Shaltyr Nepheline ore is used as a feedstock for alumina production at Achinsk alumina refinery.

Data for the Market overview section is sourced from Bloomberg, CRU, CNIA, IAI and Antaike unless otherwise mentioned.

China’s economic growth remained stable in the third quarter, ensuring the government’s full-year growth target. Gross domestic product rose by 6.7% YoY in 3Q16 (higher than the 6.1% growth forecast by analysts), China’s industrial output rose by 6.1% YoY and retail sales increased by 10.7%. Fixed-asset investment in the first nine months grew by 8.2% YoY. China produced 2.53 million units of vehicles in September 2016 (+32.8% YoY, and +26.8% MoM), according to monthly data released by the China Association of Automobile Manufacturers.

Global aluminium supply is currently growing at a slower pace now with a strong pressure of growing cost inflation including power and alumina; around 1.3 Mtpy (5% of the global production capacity outside China) of aluminium production capacity is loss making at the current LME price (including premium) and around 30% operate at low margin.

China’s aluminium smelting costs continue to be under strong pressure from rising power and alumina costs. Alumina prices in China entered the upward track from the beginning of this year, increasing by more than 50% in October 2016 from the beginning of the year. Steam coal prices have moved all the way up this year, up as much as 56% from January to October, pushing up power costs.

 According to CNIA data on a yearly basis, China’s daily average aluminium production increased only by 1.3% in September after falling for the previous five consecutive months. From January 2016 to September 2016 China’s primary aluminium production fell by 2.7% YoY to 23.223 million ton. Despite the new Chinese capacity launches that have been taking place since mid-2015, the net rise in capacity since July 2015 to August 2016 was only 0.9 million tons as the majority of closed capacity is still frozen and additional restarts might be limited. This is amid increasing pressure from aluminium cost of production and difficulties related to access to financing.

 China’s exports of aluminium semis remain stagnant as a result of weak arbitrage and a tight domestic metal market. From January 2016 to September 2016, China’s exports of aluminium semis fell by 2.0% YoY (days adj.) to 3.09 million tons as compared to 3.14 million tons during the same period of 2015.

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