Rusal Seeks Opportunity in Volatile Market

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The world’s largest aluminum maker, Russia’s UC Rusal, recently found a perfect fit with the freezing climate in Siberia, where smelters and power plants had long been forgotten. Recognizing the potential in the area, the company spent $5 million towards the completion of the Boguchanskaya Hydroelectric Dam in central Siberia. The Soviet Union began to create this dam in 1974, but plans fell through in the early 1990s – until UC Rusal and Rus Hydro went to work reclaiming this inexpensive power source.

“You need a lot of electricity to make aluminum, and power from Boguchanskaya and a clutch of similar dams is about the cheapest you can find – 0.69p per kilowatt hour, compared with the 10.45p per kilowatt hour charged by the cheapest retail supplier in Britain,” Times Online shares in a fascinating article. And it’s not just the hydroelectic dam. Times Online mentions that Rusal is considering additional power sources, too; chief executive Alexander Bulygin recently studied new possibilities with the state nuclear agency, all in the name of aluminum production.

Although you might have read our earlier posts on tough conditions in the aluminum industry, Rusal hopes to make the company less reliant on price plunges and highs. One of the few aluminum producers still looking to amp production, Rusal sees a promising outlook for aluminum as their competitors close smelters and curb output. In addition, controlling shareholder Oleg Deripaska hopes to “merge Rusal with Norilsk, a Russian metals group that is the world’s largest nickel and palladium producer,” Times Online explains. Despite recent lows for Norilsk, a merged Rusal and Norilsk would reportedly become one of the world’s largest mining companies; imagine a suitable comparison to Vale or BHP Billiton.

“Every metal has its own cycle. If you have different metals in the group, you have a natural hedge against the cycle, because when one is up the other is down. It makes us more attractive to investors,” Bulygin told Times Online. Currently, Rusal owns a decent-sized stake in Norilsk, and announced in a press release Monday that the 30 percent fall in Norilsk Nickel’s share price on the Russian and international markets “has no connection with the stake owned by UC Rusal.” Rusal considers their investments with Norilsk strategic, and notes that dropping share prices won’t convince them to sell their stock.

–Amy Edwards

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