Aughinish owner Rusal may face end of $16bn aluminium contract

The Aughinish Alumina Refinery on the Shannon Estuary near Foynes, Co Limerick.

Commodities trader Glencore is reportedly willing to walk away from a $16bn (€15bn) deal to buy aluminium from Russia’s Rusal International, the owner of the huge Aughinish Alumina smelter in the Shannon Estuary.  

Rusal, which indirectly owns Aughinish, is not under Western sanctions, but the Co Limerick smelter has faced huge uncertainty in the past well before Russia invaded Ukraine a year ago because of its Moscow-based parent.    

Under Glencore's current policy of not doing any new business with Russia, it won’t renew a deal with Rusal when that expires next year, according to Glencore chief executive Gary Nagle, Bloomberg reported. The trading house introduced that policy a month after Russia’s invasion of Ukraine, but continued to honour existing contracts.  

Aughinish escaped getting tied up in EU sanctions on Russian companies over the Ukraine war despite its ultimate ownership by Moscow-based international metals giant Rusal because aluminium is used widely in the manufacture of cars and buildings around the world.

The smelter employs around 500 people at the Co Limerick site and is involved in one of the stages in the international process of turning mined bauxite into alumina which is then made into a myriad of aluminium products. 

But it is only part of a huge global network and Rusal's operations employ 59,500 people in Russia, Ukraine, Guinea, Jamaica, Italy, and Sweden, and in many other locations. 

The Co Limerick smelter had in the past been embroiled in an earlier US sanctions regime targeting Russia because of Rusal's Russian ownership and its links to oligarch Oleg Deripasksa, who once controlled Rusal outright. 

Mr Deripaska, who is close to president Vladimir Putin, has been personally sanctioned by the US and UK.

'Right thing to do'

Mr Nagle at Glencore told Bloomberg that ending the contract with Rusal was "the right thing to do". The company has said it will only do new business with Russia if asked to by governments. 

The ending of the contract would provide a rare opportunity for Glencore’s biggest rivals to gain greater sway in the global aluminium market, assuming they’re comfortable trading Russian metal that many consumers are refusing to buy. 

Mr Nagle said the company’s stance could change depending on how the situation unfolds in Ukraine. “You can’t foresee every single situation that involves a change of policies,” he said. 

“You review your policy based on what goes on in the world,” he said. For Glencore, ending its relationship with the Russian giant would signal a major change as Rusal’s metal has for years underpinned its status as the dominant global aluminium trader. 

In 2020, Rusal announced the $16bn, under which it would sell about one-third of its production to Glencore. The deal would run until 2024, with an option to extend it through 2025, the Russian company said at the time, Bloomberg reported.

Glencore still owns a 10.6% stake in Rusal’s parent company EN+ Group International. It has previously said there is “no realistic way to exit” in the current environment. 

Irish Examiner and Bloomberg