Rio Tinto Group has joined the ranks of multinationals shunning Russia following the country’s invasion of Ukraine, calling into question the fate of its aluminum joint venture with Moscow-based United Co Rusal International PJSC.
“Rio Tinto is in the process of terminating all commercial relationships it has with any Russian business,” a spokesman for the global miner said in an e-mailed statement yesterday.
The London-based company operates the Queensland Alumina Ltd joint venture with Rusal, which holds a 20 percent stake.
Photo: Reuters
While Rio is evaluating its options regarding the partnership with Rusal, it last week said that it had the “appropriate structures” in place to ensure that Queensland Alumina’s operations would not be disrupted.
Rio has no operational assets or employees in Russia or Ukraine, the company said.
Rio Tinto’s shares ended the Sydney trading session down 7.7 percent at A$110.61.
The miner’s announcement could add to the crunch in the aluminum market, where prices are at historic highs, if it curtails Rusal’s supply from Queensland Alumina.
Russia, one of the biggest producers of aluminum outside of China, faces pressure on output after Rusal suspended shipments from a plant in Ukraine that supplied the feedstock to its smelters in Russia.
The aluminum market could lose 900,000 tonnes of annualized output in the event of a prolonged closure at the Ukraine facility, analysts at Goldman Sachs Group Inc said.
Rio generated US$12.4 billion in revenue from its aluminum business last year, including from Queensland Alumina, making it the company’s second-biggest earner after iron ore.
“Rio’s move could keep things tight in the aluminum market until trade flows can adjust,” said Peter O’Connor, a mining analyst at Shaw & Partners.
Meanwhile, En+ Group International PJSC, which owns a 57 percent stake in Rusal, is considering hiving off its international operations into a new company that would no longer have Russian ownership, people familiar with the matter said.
Billionaire Oleg Deripaska, who founded Rusal in the 1990s, is the majority shareholder in En+. He has been subject to US sanctions since 2018.
It would be difficult for Rio to stop using products from Russia for its Oyu Tolgoi copper operation in Mongolia, Bold Baatar, head of the group’s copper business, was quoted as saying by Reuters at a conference in Houston, Texas, on Wednesday.
While Rio’s announcement was unlikely to have a large material impact on its bottom line, it was still welcome, Dan Gocher, director of climate and environment at shareholder advocacy group Australasian Centre for Corporate Responsibility, said by telephone.
“Administering these types of economic sanctions and blocks is the only way we can isolate” Russian President Vladimir Putin, Gocher said. “We know he receives enormous support from the oligarchs and businesses that surround him, and Rusal is definitely one of those.”
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