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RUSAL PLC announced Q4 and full year result

Metal News - Published on Mon, 11 Feb 2019

Image Source: Wikipedia
United Company RUSAL Pic 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). Shareholders and potential investors are advised to exercise caution when dealing in the securities of UC RUSAL.

UC RUSAL announces its operating results for the fourth quarter of 2018 (“4Q18") and for the 12 months ending 31 December 2018 (“12M18”).

As disclosed by the Company earlier, on 6 April 2018, the Office of Foreign Assets Control of the Department of Treasury of the United States of America added the Company to its Specially Designated Nationals List. On 27 January 2019, OFAC announced the removal of the Sanctions and as such, the Company was operating under the Sanctions for the majority of 2018. These circumstances coupled with other factors stated below led to certain changes to ordinary levels of operational performance.

Aluminium
1. Aluminium production2 in 4Q18 totaled 943 thousand tonnes (+0.4% quarter-on-quarter (“QoQ”)), with Siberian smelters representing 93% of total aluminium output. Total production dynamics remained largely stable with capacity utilization reaching 96%;

2. In 4Q18, aluminium sales decreased (-16.2% QoQ) to 877 thousand tonnes. In 4Q18 sales of value added products decreased to 333 thousand tonnes (-32.4% QoQ). Commodity and value added products (VAP3) sales in 4Q18 were significantly challenged by short OFAC General License extensions;

3. In 4Q18, the average aluminium realized price4 decreased by 7.0% QoQ to USD2,115/t. The decrease was driven both by the London Metal Exchange (“LME”) QP5 component (-4.7% QoQ to USD2,007/t) and average realized premium component (-35.3% QoQ to USD108/t). The decline in premiums during 4Q18 is attributed to a number of factors, including market backwardation that contributed to a liquidation of traders stocks and decline of VAP share in product sales mix due to external market drivers related to the Sanctions;

4. In 12M18, aluminium production totaled 3,753 thousand tonnes ( + 1.3%, year-on-year (“YoY”));

In 12M18, aluminium production totaled 3,753 thousand tonnes ( + 1.3%, year-on-year (“YoY”));
In 12M18, aluminium sales decreased (-7.2% YoY) totaling 3,671 thousand tonnes. VAP sales amounted to 1,664 thousand tonnes (-11.0% YoY). The share of VAP sales in total sales now stands at 45%;

5. In 12M18, the average aluminium realized price increased by 7.3% YoY to USD2,259/t due to positive dynamics demonstrated mostly during first three quarters of 2018 by the LME QP component (+8.5% YoY to USD2,107/t). The average realized premium component decreased by 6.7% YoY to USD152/t).

Alumina
1. In 4Q18, total alumina production decreased by 2.1% QoQ, to 1,958 thousand tonnes. Russian operations accounted for 34% of the total output. The performance of the Company’s alumina assets was largely in line with the production plan;

2. In June 2018 the Company restarted operation of the Friguia alumina refinery in Guinea. As a result, despite various factors, including abnormal weather conditions that affected the operational performance of Windalco capacities, overall alumina production in 12M18 remained similar to 12M17, at 7,774 thousand tonnes.

Bauxite and nepheline ore

1. In 4Q18, bauxite production decreased by 3.4% QoQ, to 3,719 thousand tonnes. Nepheline output decreased by 32.3% to 817 thousand tonnes due to operational equipment care and maintenance works at the mine;

2. In June 2018 the Company announced the completion of the first stage of development of the Dian-Dian bauxite deposit and the reopening of the operations of the Friguia bauxite and alumina complex. As a result in 12M18 bauxite output increased by 18.9%, up to 13,847 thousand tonnes. Despite decrease in Nepheline ore output in 4Q18 overall nepheline production in 12M18 remained almost unchanged at 4,294 thousand tonnes (-0.9% YoY), as a result of increased output during first three quarters of 2018 compared to the same period in 2017.

Market overview6
1. During 4Q18, the aluminum price along with the whole LME metals’ basket was affected by investors sell-off on the back of rising trade tensions between the US and China that many market participants perceive to be potentially negative for future economic growth and industrial activity. Chinese Caixin manufacturing PMI dropped to 49.7 points for the first time in 19 months further proving negative investor’s sentiment toward commodities.

Aluminum stocks at the LME warehouses dropped by 175 thousand tonnes to 926 thousand tonnes during January — mid-October 2018, the lowest since December 2007, but by the end of 2018 stocks rebounded to 1.273 million tonnes. January has seen a significant increase in LME cancelled warrants to 755 thousand tonnes, a multi-year low.

Aluminium scrap availability may also become an issue in 2019 due to an expected increase of scrap prices and strong demand compared to 2018 levels.

Aluminium continues to be challenged by supply disruptions and soaring production costs. Based on the current LME price and data on average market premiums, around 50% of aluminum production facilities outside of China and 60% in China are lossmaking.

Chinese aluminium production declined for the first time in history by 0.6% YoY in 2018 to 36.4 million tonnes. More than 3 million tonnes of Chinese smelting capacity was cut from August to December 2018.

Chinese regional stocks declined by 0.5 million tonnes YoY to 1.33 million tonnes at the end of 2018 and returned to an average monthly level of 2018.
Aluminium production outside China was flat in 2018 at 27.6 million tonnes, but demand rose by 2.8% to 30 million tonnes thus retaining 2.4 million tonnes of deficit. Given that most smelters outside China are lossmaking, this is likely to limit potential restarts and will further increase the risk of supply disruptions.
After a continuous rise in 2018, Chinese exports may be set to decline due to lower arbitrage, a fall in inventories/production and new stimulation programmes expected to be introduced by the Chinese Government in 2019 to significantly improve domestic aluminum balance.

In general, the aluminium market is in heavy deficit and demand is set to improve, the aluminium price has upside potential.

The alumina market may be expected to be more balanced due to Alunorte continuing production recovery and capacity growth in China.

Source :

Posted By : Rabi Wangkhem on Mon, 11 Feb 2019
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