Russia Increases Alumina Imports from China Amid Supply Challenges

Russia has significantly increased its alumina imports from China, largely due to supplies from the Hebei Wenfeng New Materials (HWNM) plant, where Russian aluminum giant Rusal acquired a 30% stake. From January to September 2024, alumina imports from China to Russia rose by 43% year-on-year, reaching 1.2 million tons, according to data from the General Customs Administration of China (GCA) reviewed by Vedomosti. In September alone, shipments surged 1.6 times to 123,100 tons compared to the same month last year.

In monetary terms, these imports have also increased. Data from Chinese customs shows that in September, imports of Chinese alumina doubled to \$68.8 million, while for the first nine months of 2024, they rose 1.7 times to \$582.6 million.

The increase in alumina imports from China began in 2022-2023, following difficulties in sourcing the material from other countries after the start of the conflict in Ukraine. Supply volumes varied month-to-month, but a consistent upward trend has been observed since November 2023. By the end of 2023, alumina imports from China to Russia rose by 31% to 1.1 million tons compared to the previous year.

Rusal, Russia's largest aluminum producer and exporter, has been affected by these supply challenges. The company produces alumina from both domestic and international facilities but also relies on third-party suppliers. In 2021, Rusal purchased 836,000 tons of alumina, produced 8.3 million tons, and sold 1.7 million tons to third parties, resulting in total alumina consumption of 7.4 million tons that year.

Following the start of the conflict in Ukraine, Rusal faced additional supply constraints. In early March 2022, the company halted production at its Nikolaev alumina refinery in Ukraine, which was later nationalized by Ukrainian authorities in early 2023. This facility accounted for approximately 21% of Rusal's alumina production. In mid-March 2022, Australia also banned alumina and bauxite supplies to Russia, further reducing Rusal's production capacity.

In October 2023, Rusal signed a deal to acquire a 30% stake in the Chinese alumina refinery Hebei Wenfeng New Materials for 1.9 billion yuan (around \$267 million at the time). The deal was finalized in April 2024, and this acquisition is expected to secure approximately 1.44 million tons of alumina annually for Rusal.

In the first half of 2024, Rusal increased its alumina production by 13% year-on-year, reaching 2.9 million tons. Bauxite production also rose by 18% to 7.9 million tons, while aluminum output increased by 2% to 1.9 million tons. The company’s expenditure on raw materials decreased by 15% year-on-year to \$2.2 billion.

Rusal is also planning to construct a new 4.8 million ton-per-year alumina plant along with a deep-water port in the Leningrad region. The estimated cost of the project is 400 billion rubles, with commissioning expected in stages from 2028 to 2032.

Despite the recent acquisition and increased production, alumina supply remains a key challenge for Rusal, notes Alexey Kalachev, an analyst at Finam. The purchase of raw materials from China has raised production costs, with Rusal’s aluminum production costs reaching \$1,975 per ton in the first half of 2024, compared to an average of \$1,661 per ton in 2021.

The acquisition of a stake in Hebei Wenfeng will provide Rusal with access to 1.44 million tons of alumina at domestic Chinese prices, potentially raising the company’s self-sufficiency in raw materials to around 80%, according to Kalachev. Another analyst, Vasily Danilov from Veles Capital, estimates this figure to be closer to 90% with the Chinese asset.

Independent industrial expert Leonid Khazanov believes that Russia's alumina imports from China could reach 1.4-1.6 million tons by the end of the year, depending on railroad congestion in the Russian Far East. By 2025, imports could rise to 2 million tons if Rusal secures additional supplies from other Chinese refineries.

Since the beginning of 2024, the price of alumina has risen by 42% to \$625 per ton, reaching an all-time high, Kalachev noted. The price increase has been driven by a ban on bauxite exports from Indonesia, disruptions in Guinea, and reduced exports from Australia following the closure of the Kwinana plant.

Data from China’s customs agency shows that Russia imported alumina at an average price of \$506 per ton from January to September 2024, compared to an average price of \$490 per ton in 2023.