Glencore to fortify its aluminium industrial activities following acquisition of stakes in Alunorte

Following the purchase of an equity stake in Alunorte, the next step for Glencore would be to expand its operations in the aluminium sector. The argument is stronger considering that Glencore's almost seven-million-tonne aluminium supply agreement with Russian manufacturer Rusal, under its parent EN+ Group, expires in 2024.

Glencore CEO Gary Nagle said, "Glencore's contract with Rusal is a volume, not term, contract and should end sometime probably towards the second half of next year."

Nagle acknowledged that it was signed before the geo-political crisis hit Russia-Ukraine, which caused many Western firms and governments throughout the globe to withdraw from doing business with and in Russia. Glencore owns 10.6 per cent of EN+ Group, which it stated it was assessing last year but finally decided there was no feasible way out.

For years, Rusal has intermittently provided Glencore with aluminium. The term of the present contract runs from 2020, with the possibility of extending it until 2025. While the final terms are unknown, Rusal's board of directors approved the proposed terms in 2019 and filed them with the Hong Kong Stock Exchange in 2020. Glencore was permitted under Rusal's agreements to acquire up to 6.87 million tonnes of primary aluminium, including up to 344,760 tonnes in 2020 and up to 1.632 million tonnes from 2021 to 2024.

Rusal's deal also allowed either party to raise sales by up to 70,000 tonnes in 2020. Rusal can increase or reduce the annual tonnage of primary aluminium by up to 200,000 tonnes by 2021-24. It could also defer up to 10 per cent of its annual tonnage of primary aluminium supply until 2025, extending the contract by one year.

In addition to the other potential increase in sales, the Rusal board agreed to give Glencore the option to buy up to an additional 200,000 tonnes of primary aluminium per year from 2021 to 2024, while Rusal had the right to increase its yearly tonnage of primary aluminium supply by up to an additional 200,000 tonnes.

Growth in aluminium makes sense in light of Glencore's recent wave of merger and acquisition activities. Century Aluminium, in which Glencore has a 46.1 per cent holding and an offtake agreement for around 60 per cent of its aluminium, stated on Tuesday, April 25, that it has purchased a 55 per cent stake in the Jamalco alumina refinery.

Most of its upstream operations were centred on selling goods from various third-party aluminium and alumina manufacturers. This includes a 10-year alumina supply and aluminium offtake arrangement agreed last year with Malaysia's Press Metal Bintulu Sdn. Bhd.

Because the company groups the products together, it is unclear how much alumina and aluminium it sells yearly. According to the annual report, the business marketed 10.0 million tonnes of alumina and aluminium products in 2022, a 12 per cent increase from 8.9 million tonnes in 2021.