RUSAL announced Q1 2019 operating results
RUSAL announced its operating results for the first quarter 2019.
Aluminium
1. Aluminium production2 in 1Q19 totaled 928 thousand tonnes (-1.6% QoQ), with Siberian smelters representing 93% of total aluminium output;
2. In 1Q19, aluminium sales amounted to 896 thousand tonnes. In 1Q19 sales of value added products (VAP3) decreased to 259 thousand tonnes (-22.2% QoQ). This period was significantly challenged by short OFAC4 General License extensions, as the Sanctions5 were lifted only on 27 January 2019;
3. In 1Q19, the average aluminium realised price6 decreased by 7.8% QoQ to USD1,949/t. The decrease was driven both by the London Metal Exchange QP7 component (-7.9% QoQ to USD1,849/t) and average realised premium component (-7.4% QoQ to USD100/t). The decline in premiums during 1Q19 is primarily attributed to decrease of VAP share in product sales mix due to external market drivers related to the Sanctions.
Alumina
1. In 1Q19, total alumina production decreased by 1.3% QoQ, to 1,932 thousand tonnes. The Company’s Russian operations accounted for 35% of the total output.
Bauxite and nepheline ore
1. In 1Q19, bauxite production increased by 3.0% QoQ, to 3,831 thousand tonnes. Nepheline production increased by 23.5% QoQ, to 1,009 thousand tonnes following completion of maintenance works carried out at the mine in 4Q18.
Market overview8
1. During 1Q19, the aluminium price came under continued pressure. This was due mainly to a seasonally weak period and the negative impact resulting from trade wars and US-China tensions, which significantly influenced the growth prospects in key aluminium consuming regions and sectors, particularly the automotive industry. We believe these trends will continue to negatively impact the aluminium price in 2Q19, despite the prospect of a potential agreement between China and the US and certain stabilization of economic indicators demonstrated by both the US and Chinese economies in March;
2. 1Q19 aluminium consumption outside of China was up 1.5% YoY to 7.38 million tonnes. At the same time, demand in Europe remained weak and grew by only 0.9% YoY to 2.36 million tonnes. Consumption in North America grew by 1.5% to 1.73 million tonnes. In China, demand is slowly recovering and grew by 1.5% to 8.48 million tonnes. We expect total demand growth in 2019 to be around 3% YoY;
3. Aluminium production in 1Q 19 outside of China decreased by 1.3% QoQ to 6.86 million tonnes. Based on the current aluminium price and premiums, approximately 50% of the aluminium production facilities outside of China and 20% in China are estimated to be lossmaking. Despite these circumstances, capacity restarts in the US continue and, coupled with an increase of aluminium capacity in the Middle East and Russia, it is possible that the production volumes outside of China may grow in 2Q19;
4. Production of primary aluminium in China in 1Q19 amounted to 8.63 million tonnes, down by 1.2% YoY. Capacity cuts exceeded 800 thousand tonnes per year during 1Q19 and a sluggish market slowed the commissioning of new capacity as well as the recovery of idle capacity. At the same time, there is still approximately 2.5 million tonnes of new capacity ready to enter the market and up to 1 million tonnes of idled capacity that can be restarted. Coupled with a decline in overall costs specifically in terms of alumina and carbon materials prices, this indicates that the recent price spike in China is unsustainable and that there exists a certain level of downside risk;
5. In the first quarter of 2019 aluminium inventories at LME warehouses dropped by 200 thousand tonnes to 1,074 thousand tonnes. LME live warrants remain at the level of 723 thousand tonnes. Following a spike in mid 1Q19, Chinese regional stocks renewed their decline in March 2019 and fell 3.8% by the end of the month, to 1.69 million tonnes;
6. Chinese unwrought aluminium and semis exports grew by 14% YoY in 1Q19 and remain unusually strong as a result of weak Chinese domestic consumption. This trend may continue in 2Q19 as domestic demand remains subdued and the aluminium deficit outside of China continues;
7. The alumina price in most regions is set to continue on its downward trend although there remains the potential for a correction owing to the persisting high cost of alumina production, particularly in China.
Source : Strategic Research Institute