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Aughinish Alumina owner points to business risks from Ukraine war

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Russian metals giant Rusal, which owns Limerick’s Aughinish alumina refinery, has warned of supply, funding and profits risks to its business as a result of the war in Ukraine.

The Moscow-listed company, whose parent company is part-owned by UK-sanctioned oligarch Oleg Deripaska, is battling the fallout from multiple rounds of international sanctions against Russia that have battered commodities, securities and foreign exchange markets.

In a statement on the 2021 results, Rusal said increased production costs, the temporary closure of its Ukrainian plant and an Australian ban on key raw materials are affecting its operations.

Australia has banned the export of bauxite ore and alumina – the main components of aluminum production – to Russia. Alumina exports from Australia account for “nearly 20 percent of Rusal demand,” the company said in its statement.

Aluminum is used to make everything from power lines and industrial equipment to vehicles, buildings and consumer electronics.

Rusal also said that the Russian government’s order for metal producers to keep local prices low “could have a negative impact on the company’s profitability.”

In its Wednesday financial results, Rusal said it may have to postpone investments due to equipment shortages.

Replacing foreign currency credit facilities with ruble-denominated debt could have a “negative” impact on financial results.

Despite the challenges, Rusal announced a 40 percent jump in sales for 2021 due to higher aluminum prices. But aluminum production costs rose 9.9 percent due to “global market turmoil,” Rusal said.

“If the situation persists or develops significantly, including the loss of significant portions of foreign markets that cannot be reallocated to new markets,” Rusal said, “it may adversely affect the business, financial condition, prospects and results of operations.”

Rusal said it couldn’t accurately assess the “quantitative effect” of all the restrictions and impacts, and warned things could get worse if additional sanctions or countermeasures from Russia emerged.

Meanwhile, there are doubts about the future of Rusal’s Irish refinery at Askeaton, West Limerick, which is Europe’s largest alumina plant.

Although it is not on any international sanctions list, global mining giant Rio Tinto recently decided to cut ties with the refinery and halt shipments of bauxite ore and purchases of finished alumina.

The tánaiste, Leo Varadkar, said last week he was “determined” to keep the plant operational “at all costs”. Aughinish employs 482 full-time staff and 385 contract workers at its Shannon Estuary facility.

Aughinish Alumina was bought by Rusal in 2007.

Rusal is owned by Russia’s En+ Group, which holds a controlling stake of 56.88 percent in the company. Oleg Deripaska holds a 45 percent stake in En+.

He and his companies are not on the EU sanctions list, although he has been on a US list since 2018. Aughinish Alumina was unaffected at the time as Mr Deripaska sold his majority stake in En+.

However, Aughinish Alumina’s access to the EU’s Emissions Trading Scheme (ETS) was suspended this month by the Environmental Protection Agency (EPA) at the request of the European Commission.

The En+ Group announced this month that it was “reviewing” its strategy regarding its Russian business, including a potential spin-off of Rusal’s international assets.

https://www.independent.ie/business/world/aughinish-alumina-owner-flags-business-risks-from-ukraine-war-41502616.html Aughinish Alumina owner points to business risks from Ukraine war

Fry Electronics Team

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