Tag Archives: Alcan

RUSAL joins CNIA

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UC Rusal has become a member of the China Nonferrous Industry Association (CNIA), according to a press release today.

It had previously been reported that Rusal’s president Oleg Deripasky had been in Beijing last week for a meeting with the CNIA. But this move was not mentioned in those stories. The press release gives virtually no details of how Rusal met membership criteria, since Rusal owns no smelting assets inside China (plenty across the border of course.)

It’s an unusual move, and I went so far as to describe it as “hopeful” to the Reuters Metal Bulletin reporter who rang me for comment.

CNIA is a government entity. Industry associations in China do not operate in the way we are used to in other countries. Although the CNIA supports industry initiatives, its primary role is the roll-out and execution of government policy. It may seem a little bit of an overkill to set up an industry association for an industry with fewer than 70 entities (which together own about 130 smelters.) But think in terms of steel, where there are thousands of proprietors, and you begin to understand why the government makes use of industry associations. It is also a throwback to the 1990s, when the aluminium industry was entirely government-owned.

To understand the work of the CNIA, recall who it was that led the closure of all China’s Soderberg lines in 2004 and 2005.

Since Rusal has no assets in China (they own 2 cathode plants and a JV with a metals trader), it is hard to understand how they qualified.

And if Rusal expects a “leg up” in promoting sales of metal from their plants into China via the CNIA, it seems a long stretch, from what I can see. In the first place, we have local and provincial governments propping up the industry, keeping smelters open and even funding the re-start of additional capacity, all of which keeps China over-supplied. Second, the last major Sino-Russian deal was the crude oil pipeline, where China has short-changed Russia to the point that the Russian President came to Beijing to complain. Third, it has been a long time since the Chinese took advice from any foreigners, much less the Russians.

To the best of my knowledge, no other foreign companies are members of the CNIA. Alcan may have been, for the short while that they owned their Ningxia plant. Alcoa had a small interest in the Chalco Ping Guo plant some years ago, and now have their strategic alliance with CPIC, but I never hear Alcoa talking about being a member.

But to turn this thing full circle, CNIA is a member of the IAI (IAI’s China production figures come from the CNIA), so Rusal may now be an IAI member twice!

Editor’s note - It was Metal Bulletin who called me, not Reuters.

 

Pacific Aluminium

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Surprise, surprise, Rio Tinto has finally announced that they will be spinning off 13 plants from its alumina refining and aluminium smelting portfolio, including 6 Australasian plants.

The six Southern Hemisphere plants are the Gove bauxite and alumina complex, Boyne Island and its power station, NZAS, Bell Bay in Tasmania and its share of the Tomago smelter. These operations will be split off into a company called Pacific Aluminium.

No doubt there will be plenty of analysis in the world’s press about the Rio decision, and most of it should be positive. Rio gets back to doing what it does best, digging things out of the ground. It finally puts right what it should never have done in the first place, in buying Alcan at the top of the market.

So with lots of other commentary about the place, I thought I would give some views about aspects that the analysts won’t cover.

First up, Pacific Aluminium. Before you rush to buy shares in this company once it is hived off, consider this. The assets under the new banner are among the oldest and most expensive in the RTA portfolio. They are in a high cost country (Australia), where electricity mostly comes from coal, and where a new carbon tax is about to be introduced.

As a former employee of the Tomago plant, there are a couple of other aspects which strike me, even if they won’t affect the value of the company.

Consider the fact that employment at senior levels in smelters is a global affair. Technical and plant management people will often do 2 - 3 year stints in the Antipodes as part of their career development. I suspect that there will be several senior staff in plants like Tomago, who will be looking for an urgent recall back to the motherland. As employees of Pacific Aluminium, they will no longer have the career opportunities that they had in a network of some 22 smelters. And in any case, they will be confined to Australia and New Zealand, not France or Canada where their families and loyalties lie.

Consider also the fact that Pacific Aluminium will sooner or later lose access to possibly the most important part of the old Alcan/Pechiney organisation - the Pechiney Technology group. Without access to R&D, technical support and related services, Pacific Aluminium will be forced to pay market rates for these services. This is incredibly important in plants such as Tomago, which uses a hybrid design pot (called AP22).

I notice also that the new company will report into Rio’s Business Support & Operations group. It will not report to anyone in the RTA group within RT. No doubt the task is to ready the new company so that the board of Rio can accept an offer at a time of their choosing, not hamstrung by too many ties back to the organisation.

Not that the ties are strong in the first place. Since the takeover of Alcan back in 2008, Rio has struggled with the culture inside the former French Canadian company. This is because Alcan itself was still struggling with the digestion of the Pechiney group back in 2004. One would think that a French Canadian company could easily assimilate with a French company, but that was not the reality. So its no surprise that the culture in RTA is split down the middle - you were either a former Alcan person (most of the employees), or you came from one of the four plants that Rio owned prior to the Alcan purchase.

So the people at the steering wheel of Pacific Aluminium have some serious challenges, as does the board of RT if they want to find a buyer. Energy costs, carbon taxes, HR issues, ageing technology, and high cost of production to name some.

Perhaps that is why Rio elected to include the Gove operation as part of the new company. Gove more closely fits with the Rio model - dig things out of the ground - but without Gove, the asset portfolio looks decidedly weak.

Omen or wishful thinking?

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Primary aluminium industry long-timers will cringe, but the inert anode is once again reported to be lurking in the shadows of the future. To my knowledge, at least 4 companies are working on an inert anode.

Chalco has been quietly working on some design principles for at least 2 years that I know of, though probably much longer. Rio Tinto Alcan has a huge carbon R&D team, part of which is also focused on the technology. And of course, Alcoa has been working to develop some cells, ever since their disastrous flurry in 2003

UC RUSAL is the fourth, and their program features in an article in Steelguru this week. While a magazine with a name like that can hardly be called the fount of knowledge on aluminium R&D, nevertheless, it makes for interesting reading.

According to the article, 5 Siberian smelters together account for 6% of all of Russia’s electricity demand, which puts them in a vulnerable position.

The article goes on to say that RUSAL claims it will have the inert anode operating by 2015. It quotes Rusal’s president Oleg Deripaska as saying that their inert anode will generate oxygen. In fact, so much oxygen that one pot will produce the equivalent of 70 hectares of forest. That’s a bold claim 5 years out.

But there are those who talk and those who do. I understand that Alcoa now has more than one cell already operating, with the metal coming out of the pots already at very high grades. That was one of the major problems with the early work - the anodes did not last as long as a carbon anode, and the metal was poor quality.

Time will tell. Perhaps a breakthrough will come. Perhaps some progress has already been quietly made. But even if an inert anode can be brought up to the standards set by carbon anodes, the trick will be to make them capable of retro-fitting to the 40 million tonnes of existing smelting capacity.

Alcan’s Coega project officially dead

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The following article comes from AFP. Although it’s not really any great surprise to anyone, this project has a soft spot in the heart of your humble blogger. It was because of Alcan’s desire to reduce the capital cost of building this and future smelters, that lead Alcan to transfer me to their Beijing office. At that time (2004-2005), Alcan had a project called FECRI (Full Economic Cost Reduction Initiative), whose purpose was to find at least 25% savings out of the capital and cash costs of building a smelter. Fat lot of good it did - although we were highly successful, it didn’t prevent the then Alcan Directors from getting greedy when Rio Tinto waved a wad of cash in front of their faces.

Mining giant Rio Tinto Alcan has shelved a $US2.7 billion ($A2.93 billion) smelter project in South Africa in the face of electricity supply and pricing concerns, a spokesman for Rio Tinto Africa said on Friday.

The action followed a move by South Africa’s government and energy supplier Eskom to terminate an energy supply deal for the 720,000-ton aluminium shelter planned for Coega in the Eastern Cape province.

“We have all recognised that the supply of power and price has changed significantly. We will start discussions to review the project in the light of these changes,” said Rio Tinto Africa spokesman Jean Chawapiwa-Pama.

Alcan Inc, later Rio Tinto Alcan, entered an electricity supply agreement with Eskom in 2006 ahead of a wave of power blackouts in early 2008 that shut down key industries.

To finance new infrastructure, the ailing energy giant this week pushed for a 45 per cent annual tariff rise over three years after introducing two tariff hikes that average 59 percent since last year.

“We fully understand that conditions surrounding the availability and forward pricing of power in South Africa have shifted significantly in the last two years,” said Guy Larin, vice president of the mining house’s business development in Africa in a statement late Thursday.

Rio Tinto Alcan and South Africa’s Industrial Development Corporation had invested about $US130 million ($A141.27 million) in the project since 2006, with construction originally scheduled to start last September.

Larin said attractive conditions for the project remained in place but a long-term, competitive power supply agreement was essential and would have to be renegotiated.

“We remain ready to assist South Africa in realising the considerable benefits of a smelter project in the Port Elizabeth area,” he said. – AFP