The Russian aluminium giant and global leader in low-carbon aluminium production, Rusal, recently unveiled its interim results for H1 2023. Amid a complex economic backdrop, the company's performance, market insights, and strategic direction come to the forefront.

Rusal operates through four distinct segments – aluminium, alumina, energy, and mining and metals – each a strategic pillar contributing to the company's vitality. The aluminium and alumina segments hold particular significance, driving the core of Rusal's operations.

In 2022, Rusal represented 5.6 per cent of global aluminium production, 4.5 per cent of alumina production, and nearly half of its production involved value-added products. Notably, Rusal's low-carbon aluminium, ALLOW, boasts a carbon footprint five times lower than the industry average.

Market challenges and strategic response:

The first half of 2023 brought forth a formidable set of challenges, including global market pressures, unprecedented external constraints, and a substantial decline in aluminium prices. In response, Rusal has honed its strategic priorities. The company is actively bolstering raw material self-sufficiency, revamping export strategies, and advancing a sustainable development program to ensure continuity and growth.

Financial performance overview:

The numbers reflect the dynamic landscape. Total revenue contracted by 16.9 per cent, amounting to USD 5,945 million for H1 2023, compared to USD 7,153 million in the previous year. This dip is attributed to a remarkable 24.2 per cent plunge in aluminium prices on the London Metal Exchange (LME), driving the average aluminium price per tonne to USD 2,331, a drop from USD 3,075 in 2022. Despite a 9.8 per cent surge in aluminium sales volume, this was outweighed by the 25.7 per cent decline in the weighted average realized aluminium price.

Costs and profitability shifts:

Cost dynamics also played a role. The total cost of sales rose by 9.6 per cent to USD 5,217 million in H1 2023, influenced by increased alumina purchases and elevated electricity and transportation costs due to tariff adjustments. This, in turn, significantly impacted RUSAL's financial metrics. Adjusted EBITDA contracted by 84.0 per cent, settling at USD 290 million, down from USD 1,807 million in the same period last year. The adjusted net profit followed suit, dropping by 54.3 per cent to USD 315 million.

Adapting to market realities:

In the face of challenges, Rusal exhibited resourceful management. A positive shift in working capital led to a net cash flow from operations, reaching USD 236 million for H1 2023 – a noteworthy improvement over the previous year's negative figure.

Global market overview:

The broader market context is equally captivating. Base metals prices sustained a downward trend in the initial half of 2023. Optimism surrounding China's post-COVID-19 revival and reduced US inflation initially boosted prices, but fading global manufacturing activity, economic concerns in China, the US, and Eurozone, coupled with coordinated central bank actions and falling commodity prices, shifted the trajectory.

Global primary aluminium demand dipped by 1.5 per cent year-on-year, with China witnessing a 1.5 per cent growth, while the rest of the world (RoW) faced a 5.5 per cent decline. A modest 2.4 per cent increase in global aluminium supply and China's additional capacity led to a market surplus, albeit with regional variations.

As the aluminium landscape continues to evolve, Rusal remains unwavering in its commitment to sustainability, operational resilience, and strategic adaptation. With a focus on optimizing production facilities and addressing cost dynamics, the company is poised to navigate the intricate currents of the global aluminium market.

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