Rio’s Massive Dunkerque Aluminum Smelter to Change Hands

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Sanjeev Gupta, the industrial buyer of distressed steel, aluminum and coal assets (to name just a few of the areas he has expanded into in recent years), has so far managed an uncanny knack of good timing.

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Buying steel assets just before the global steel market finally lifted even Europe out of the doldrums, and now aluminum. To be fair, Gupta is not new to aluminum.

Gupta’s Liberty Group bought the Lochaber aluminum smelter and hydro-electric power plant from Rio Tinto in 2016 in a $410 million deal when Rio was desperate to shed “non-core” assets and raise cash.

Since then, the aluminum price has risen some 30%. Now, with aluminum on a roll, Gupta is again picking over the carcass of Rio’s aluminum assets, this time putting in a $500 million offer for Europe’s biggest refinery: the Dunkerque aluminum smelter.

Lochaber was only 47,000 tons capacity, but Dunkerque is on an altogether different scale, producing 280,000 tons a year. That disparity makes it a steal with respect to purchase price per ton of capacity compared to Lochaber, and is said to be profitable at current aluminum prices.

For most aluminum producers — unless they are niche, high-purity players or have integrated downstream activities — tend to have larger concerns leveraging economies of scale and sometimes integrating upstream into alumina, and even bauxite mining, to secure their supply chains. It is rumored Gupta may have something of the same objective. He is apparently in talks with Rio for more of its aluminum assets, according to the Financial Times. Rio is also looking to sell a 205,000-ton-per-year Isal aluminum smelter near Reykjavik, Iceland, and its Pacific Aluminum business, which analysts say could fetch more than $2 billion, with Gupta rumored to be interested.

Quite how he has managed to fund his rapid acquisition spree in recent years is the subject of some speculation. With purchases of generally distressed assets in shipping, recycling, banking, commodities trading and energy, there does not appear to be an obvious theme to his empire building beyond being broadly metals-related and presumably cheap.

Turning distressed assets around, though, is a hugely intensive and time-consuming process — and not without considerable risk, as many fail.

Yet so far, Gupta’s vehicles, Liberty Group and Simec under the GFG Alliance holding company, have apparently done rather well.

The success of Dunkerque will be contingent on the French nuclear generator EDF continuing to supply electricity at viable rates. That is probably, for now, a given, since the French apparently are more concerned about maintaining employment of the 600 workers at the plant.

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