Failure of Russia's Largest Hydroelectric Plant Fails to Boost Aluminum Price

Even a major power failure at one of Russia’s most important hydroelectric plants supplying the Rusal smelters at Sayanogorsk and Khakassia did not bolster the flagging aluminum price which dropped back below $2000/metric ton ($0.91/lb) this week. A turbine room at the Sayano-Shushenskaya hydroelectric power station flooded during routine maintenance killing at least 10 with 32 missing according to a New Zealand report. The plant was closed and power for the Rusal smelters was drawn from Krasnoyarsk and Kemerovo according to the company such that production would not be affected in the short term. But with winter coming on, it raises the question whether power will have to be rationed to the smelters as power demands rise elsewhere.

The Sayano-Shushenskaya power station is the largest hydroelectric plant in Russia, with a capacity of 6.4 million KW/hr. Three of the stations’ 10 power generating units were destroyed and repairs could take years. Steel maker Evraz Group also relies on the Sayano hydro electric facility for its mills and coal mines in the Kemerovo region. For now Evraz has been able to draw on alternative supplies but the group faces the same problems as Rusal as power demands rise in the fall.

Normally such an occurrence would be enough to lift the aluminum price in anticipation of a drop in supply but with so much metal in store around the world, markets shrugged off the possible impact and the price dropped back towards $1900/ton. It underlines how the aluminum price is being driven by risk appetite, the strength of the dollar, stock markets and oil prices rather than changes in supply and demand.

–Stuart Burns

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