Russian aluminum will raise the American automotive industry to its feet
In April 2018, one of the world’s largest aluminum producers, the United company RUSAL, was included in the next us sanctions list since its shareholder was Oleg Deripaska. However, in December of the same year, us Treasury agreed to the removal of restrictions in the case of several conditions. The main ones were the reduction of Deripaska’s share in the company, as well as the inclusion of independent Directors in its Board of Directors and a strict audit of the work. In January 2019, our sanctions against «RUSAL» has been removed.
Now the company, as reported, in particular, RBC with reference to the press service of RUSAL, agreed with the American manufacturer of aluminum alloys Brady Industries on the joint construction of a plant for the production of aluminum rolled products for the automotive industry.
It is planned that the Brady Atlas plant (preliminary estimated cost — $ 1.68 billion), in which RUSAL’s share will be 40%, will be located in Kentucky and will be able to produce 300 thousand tons of car rental per year from 2020. This will help to balance the expected deficit in the production of rolling sheets for the American automotive industry. It is planned to supply metal from the Taishet aluminum plant under construction in Siberia.
Some experts, including, for example, the Director of the ACRA corporate rating group Maxim khudalov, suggested that such investment in us economy could be part of an agreement with us Treasury since the plant is necessary for Americans not to import imported products from China and Saudi Arabia. Did the Americans still manage through sanctions, which we, as constantly assures the Russian government that the elephant shotgun, still «squeeze» for themselves Russian aluminum?
Answering this question, the analyst of FINAM group Alexey Kalachev urged to divide politics and economy, as not always coinciding with each other.
— If you look at the situation soberly, it becomes clear that the sanctions were imposed specifically against Deripaska. As soon as he lost control of his companies, the need for them disappeared. Moreover, no one, I suspect, even the Americans did not expect that the sanctions will give such an effect.
«SP»: — Why?
Because «RUSAL» in fact, is an international company that affects the market price, which supplies aluminum to the USA. Thought it’s just there’s some kind of plant. Naturally, when we realized the scale, we played back at the first opportunity.
«SP»: — That is, the sanctions were really ineffective against Russia?
— Although the timing of the sanctions on RUSAL was postponed and postponed, the quotes still fell, as the risks persisted. Exports fell slightly, but in fact, the sanctions did not have much impact on the manufacturer. On the contrary, RUSAL’s production and profits have grown during this time, as aluminum prices jumped on fears, and the ruble fell.
«SP»: — And yet — why «RUSAL» in such cases needed the construction of a plant in the United States?
— Given that RUSAL uses the Soviet heritage, and Oleg Deripaska is Russian, many people think that this is a question of patriotism. But this is nothing more than international business. Because RUSAL is registered in the UK jurisdiction on the island of Jersey. Production shares are placed in Hong Kong and traded in Russia as shares of a foreign Issuer. Whether Deripaska retained full control of RUSAL, I think we may never know, but officially he is, so to speak, out of the brackets.
«SP»: — why did the US need Russian aluminum and not some other? After all, we are not alone in producing it…
— Yes, the Americans faced a dilemma, which aluminum to choose, Russian or someone else. America has made a choice in favor of Russia. And it happened for a number of reasons. First, because with another aluminum giant — China — the US already has a serious export-import imbalance that provoked trade wars. And Russia imports more from the US than it exports there, and this is beneficial to both sides. And the war of sanctions has nothing to do with this, as well as the Crimea and Donetsk.
Secondly, Russian aluminum is the most environmentally friendly in the world, having the smallest carbon footprint. Because it is produced not with the use of coal and oil, as in other countries, but with the use of electricity from hydroelectric power plants.
So from the point of view of the prospects of using such an aluminum plant in the United States, according to expert economist Leonid Khazanov, it is from all sides a cool idea.
— Because in the US there are very few enterprises for the production of primary aluminum since they have been closed for the last 20 years due to the growth of energy tariffs. Local companies either develop the production of secondary aluminum alloys from scrap or simply import aluminum from other countries. But at the same time, aluminum consumption in the US is growing, and this is especially noticeable in the automotive industry — both in the production of cars and trucks. So from the point of view of the prospects of using aluminum to have a rolling plant in the United States, this idea, again, is extremely tempting. In the American automotive industry is a deliberate policy to increase the consumption of aluminum, as with the help of this metal reduces the weight of cars and reduces fuel consumption.
«SP»: — But then there is quite a reasonable question — why not launch such volumes in the Russian industry?
— Yes, because the existing plants for the production of aluminum rolled in Russia is quite enough. We have a large plant in Samara, producing 200 thousand tons of rolled products per year, in Kamensk-Uralsky with a capacity of 100 thousand tons per year, in Belaya Kalitva produce about 40 thousand tons per year. And this amount of aluminum rolled products more than covers the needs of our industry in terms of both range and tonnage, so much so that at least 50% of Russian flat aluminum rolled products are exported.
«SP»: — What about our car industry?
— In the Russian automotive industry, the range of applications of aluminum is small. These are mainly wheels.
«SP»: — So why is it not used in the automotive industry, as they say, to the fullest, once in Russia its overproduction?
— And because there is a stagnation of thinking of our manufacturers who are used to working with steel. Employees of domestic car factories are easier to weld two steel sheets than two aluminum. Another factor is not in favor of the use of aluminum in the Russian automotive industry — it is believed that this is an excessively expensive metal. But do not forget that aluminum is more resistant to corrosion than steel, respectively, its service life is longer.
— The scope of application of aluminum in our country is extremely small, — Alexey Kalachev develops the topic, — in contrast to the same USA, where public transport, railway cars, and much more are made of aluminum. Deripaska has been promoting the idea of cheaper use of aluminum in the domestic economy of Russia for several years. His existing factories for the production of food foil is, by and large, a trifle. Buying almost all Russian manufacturers of wheels also did not bring him big dividends. In electrical engineering, aluminum has never been a competitor to copper due to the fact that over time it becomes flammable.Is there any way to correct this situation in order to leave Russian aluminum in Russia?
— It would be nice if it was. Earlier, for example, aluminum was widely used in our aviation industry, but you can see how it is now in a seedy state. It is necessary to develop production areas where aluminum can be used — construction, transport engineering and so on. But it is very difficult. And the plant in America is a bypass of import duties, it is favorable.
However, Alexey Kalachev summed up, the construction of RUSAL’s aluminum production plant in the US, as the joint venture reported earlier, can still be considered a kind of achievement of the Russian economy.
— The situation around the oligarchs with their billions is one thing, the question was, in fact, not about whether or not Mr. Deripaska will be dispossessed, — he explained. — Our plants and power plants, where people work, where products are produced, where the state receives taxes — this is important. There were serious concerns about how we would not have to close production due to the fall in exports due to sanctions, when we did not have time to raise domestic consumption. However, now it is obvious that RUSAL will continue to work and develop, the plants will work and consume electricity, and people will not lose their jobs and keep their wages.