Rio to trigger force majeure on alumina refinery controlled by Rusal

After Glencore, Rio Tinto, one of the world’s largest metals and mining corporations has decided to trigger force majeure on some Rusal-linked contracts. The mining group declared on Friday that it would work with its customers to minimise disruptions in raw material supply and would fully comply with the US sanctions and therefore, would terminate bauxite supply contracts with a giant alumina refinery in Ireland controlled by Rusal group. This is to ensure the certainty of output from Rio’s big refinery in Queensland where Rusal owns 20 per cent share.

The rest 80 per cent share of the refinery is owned by Rio. The refinery produces 3.95 million tonnes of alumina every year, whereas Rio produced 3.6 million tonnes of aluminium in 2017.

Rio said in the statement, “Rio Tinto has reviewed arrangements it has with impacted entities. The arrangements include Rusal’s 20 per cent interest in Queensland Alumina Limited in Australia, including Rusal’s associated supply and offtake arrangements, bauxite sales to Rusal’s refinery in Ireland and offtake contracts for alumina that are used at Rio Tinto’s smelters, mainly in France and Iceland.”

Following Glencore’s statement last week, Rio said that it will declare force majeure on a deal to buy 50,000 tonnes of aluminium from Rusal. Force majeure will allow both the parties to walk out from the deal under any extreme circumstances.

Otherwise, the shareholding could force Rio to shut Gladstone Plant since it is linked with Rusal and could also force to lay off hundreds of employees, if not the former could alter the terms of those sanctions applied to Gladstone Plant.

Not only so, this could also lead to a further rise in alumina price, which already jumped 17 per cent to an eight-year high and closed at US$556 per tonne on Friday, April 13, 2018, as per the Metal Bulletin’s price assessment.