1. Homepage
  2. Equities
  3. United Kingdom
  4. London Stock Exchange
  5. Rio Tinto plc
  6. News
  7. Summary
    RIO   GB0007188757


Delayed London Stock Exchange  -  05/24 11:35:24 am EDT
5541.00 GBX   -0.38%
11:49aRio Tinto's Madagascar mine restarts after reaching deal with protesters
10:30aRio Tinto's Madagascar mine restarts after reaching deal with protesters
08:53aELLIS MARTIN : Skyharbour Resources Ltd (VAN:SYH) Secures Option to Acquire an Initial 51% and Up to 100% of the Russell Lake Uranium Project from Rio Tinto
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Power problems take a toll on global aluminium output: Andy Home

01/24/2022 | 08:57am EDT

LONDON, Jan 24 (Reuters) - Global aluminium production rates started falling in the closing months of 2021 as power constraints spread from China to Europe.

The world's smelters may have produced a record 67.3 million tonnes of aluminium last year, but all the 3% year-on-year growth derived from the first couple of months.

Annualised run-rates peaked in February at 68.3 million tonnes and slowed to 66.2 million in December, year-on-year production growth turning negative in both November and December.

The resulting supply gap has propelled aluminium prices to decade highs, the London Metal Exchange (LME) three-month price currently sitting above the $3,000-per tonne level, last trading at $3,030.

Physical premiums are also soaring, adding to the pain for aluminium buyers.

Such high prices should incentivise more supply, but everything depends on whether the world has sufficient energy to support power-hungry aluminium smelters.


China, the world's largest primary aluminium producer, was operating at an annualised rate of 37.6 million tonnes in December, according to the latest assessment by the International Aluminium Institute (IAI).

That's 1.3 million tonnes lower than in December 2020 and 2.1 million tonnes off the February peak.

Drought in hydro-powered Yunnan province curtailed output in what has become a major "green" aluminium production hub earlier in the year.

More smelter hits came in the second half of 2021 from the government's dual-control energy efficiency targets, which resulted in several provinces mandating curtailments of heavy industry, particularly intensive power users such as aluminium smelters.

China has been the driver of global primary metal production growth for two decades, but the juggernaut seems to have run out of road.

The country turned net importer of unwrought aluminium and alloys in 2020, and imports rose further last year to a record high https://www.reuters.com/markets/commodities/china-2021-aluminium-imports-rise-annual-record-high-2022-01-18 of 3.2 million tonnes.

China remains a massive net exporter of semi-manufactured products, but has been importing ever more primary metal to make them.


China's power woes have spread to Europe with a vengeance.

Analysts at Citi estimate around 800,000 tonnes of smelter capacity has been curtailed in the region, with up to 1.2 million tonnes at risk from soaring power prices. ("Global Commodities - Ex-China aluminium deficit looms large", Jan. 19, 2022).

Production in both Western and Eastern Europe slipped marginally last year, with run-rates in the former slowing appreciably over the fourth quarter.

A strike at Alcoa's 228,000-tonne per year San Ciprian smelter in Spain was already acting as a drag on regional output before the company announced it would suspend production for two years https://investors.alcoa.com/news-releases/news-release-details/2021/Alcoa-Reaches-Agreement-on-Future-of-San-CiprinSmelter/default.aspx as part of a peace deal with unions.

As other smelters https://www.reuters.com/business/energy/europes-aluminium-smelters-cut-output-power-crunch-intensifies-2022-01-13 reduce amperage or fully curtail potlines due to runaway spot power prices, the slowdown in European output will become more pronounced over the coming months.

Europe's primary metal supply shortfall is forecast by Citi to expand from 3.5 to 4.2 million tonnes.

The growing supply-chain tension is why the European duty-paid premium over the LME cash price has exploded from under $300 per tonne in December to a current $442.


Europe's aluminium production woes will last as long as the rolling energy crunch and maybe longer if this year's high spot prices become embedded in higher forward pricing structures.

Output, however, should pick up in both North and Latin America.

A 2.4% drop in North American output last year was largely down to a four-month strike at the Kitimat smelter in Canada, production at the 432,000-tonne-per-year plant falling to 263,000 tonnes in 2021.

The strike ended in October and the plant will undergo a controlled restart this year, according to operator Rio Tinto .

Argentina's Aluar smelter will also be returning to full 400,000-tonne capacity this year after running at 75% during the COVID-19 pandemic.

Meanwhile, the 447,000-tonne-per-year Alumar plant in Brazil will be brought out of mothballs https://www.reuters.com/markets/commodities/south32-alcoa-restart-alumar-aluminium-smelter-brazil-2022-01-05 by its joint owners Alcoa and South32 this year thanks to a renewable power deal.

Latin America saw the fastest production growth of any region last year and is on track to remain a significant driver of global run-rates this year.


However, whatever happens in the rest of the world pales into insignificance relative to China, which last year still accounted for 57% of the world's primary aluminium production.

Citi estimates potential restarts and delayed new smelters could amount to three million tonnes per year of production capacity coming on line this year.

That would have global implications, both dampening China's appetite for primary metal imports and boosting its exports of semi-manufactured products.

However, here too everything hangs on energy and power.

Beijing remains committed to peak coal usage by 2025 but it's clear that last year' dual-control energy targets were too severe, requiring a series of policy adjustments, not least orders to domestic coal operators to boost production into winter.

There will probably be a lot more fine-tuning by policy-makers seeking to balance decarbonisation with the country's still fast-growing energy requirements.

That may open a regulatory window for aluminium operators to restart idled and launch new capacity to capitalise on the current boom in prices.

But China's pledge to start phasing down coal use from 2026 still spells big trouble for its primary aluminium sector.

Despite a collective rush to tap Yunnan's hydro-energy grid, coal remains the dominant power source for the country's smelters, accounting for 88% of the 37 million tonnes of aluminium produced in 2020, according to the IAI.

Targets may be adjusted in the coming months, but last year's crunch may be the first of many, which is why so many analysts are talking about a fundamental shift in China's aluminium dynamics.

Moreover, Europe's lengthening list of smelter casualties is a warning sign that power availability poses a fundamental challenge for the aluminium industry globally.

The opinions expressed here are those of the author, a columnist for Reuters.

(Editing by Jan Harvey)

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
ALCOA CORPORATION -3.85% 60.8233 Delayed Quote.5.98%
EURO / BRAZILIAN REAL (EUR/BRL) 0.56% 5.1717 Delayed Quote.-18.66%
RIO TINTO PLC -0.38% 5541 Delayed Quote.13.70%
S&P GSCI ALUMINUM INDEX -1.98% 183.701 Real-time Quote.5.09%
SOUTH32 LIMITED 0.21% 4.68 Delayed Quote.16.46%
All news about RIO TINTO PLC
11:49aRio Tinto's Madagascar mine restarts after reaching deal with protesters
10:30aRio Tinto's Madagascar mine restarts after reaching deal with protesters
08:53aELLIS MARTIN : Skyharbour Resources Ltd (VAN:SYH) Secures Option to Acquire an Initial 51%..
03:16aAustralian shares close volatile session lower as tech stocks weigh
05/23Blackstone Minerals Appoints CFO; Shares Gain 7%
05/23SECTOR UPDATE : Energy Stocks Rise Monday as Natural Gas Price Surges
05/23SECTOR UPDATE : Energy Stocks Tracking Higher with Gains in Natural Gas Prices
05/23SECTOR UPDATE : Energy Stocks Climb Premarket Monday
05/23India's top mining, steel groups warn of adverse impact from export duty hikes
05/23Rio Tinto, BP Enter Into Biofuel Collaboration
More news
Analyst Recommendations on RIO TINTO PLC
More recommendations
Financials (USD)
Sales 2022 59 820 M - -
Net income 2022 19 265 M - -
Net cash 2022 2 623 M - -
P/E ratio 2022 6,05x
Yield 2022 12,7%
Capitalization 116 B 116 B -
EV / Sales 2022 1,90x
EV / Sales 2023 2,15x
Nbr of Employees 49 000
Free-Float 65,4%
Duration : Period :
Rio Tinto plc Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends RIO TINTO PLC
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 23
Last Close Price 69,93 $
Average target price 79,48 $
Spread / Average Target 13,7%
EPS Revisions
Managers and Directors
Jakob Stausholm Chief Executive Officer & Executive Director
Peter Lloyd Cunningham Chief Financial Officer & Executive Director
Dominic S. Barton Chairman
Mark Davies Chief Technical Officer
Arnaud Soirat Chief Operating Officer
Sector and Competitors
1st jan.Capi. (M$)
RIO TINTO PLC13.70%116 168
BHP GROUP LIMITED15.25%172 075
GLENCORE PLC36.82%84 188
GRUPO MÉXICO, S.A.B. DE C.V.10.53%38 780