Glencore Will Not Renew Its 16 Billion Aluminum Contract With Russian Aluminum Company
May 16, 2023
Glencore will not renew its $16 billion aluminum contract with Russian aluminum company
On March 16th, foreign media reported that Gary, CEO of Glencore © Nagel stated that the company will abandon its contract to purchase $16 billion in aluminum from Russia's largest aluminum producer.
Nagel stated that according to the company's current policy of not conducting any new business with Russia, Glencore will no longer renew its contract with the Russian company when its contract with Rusal International expires next year.
Glencore announced the above policy one month after the Russia-Ukraine conflict broke out at the end of February last year, but continued to perform the existing contract. Nagel said that this is the correct approach. It will only conduct new business with Russia if requested by the government.
This termination of the contract will provide a rare opportunity for Glencore's biggest competitor, Trafigura Group, to gain greater influence in the global aluminum market, provided they can confidently sell Russian metals.
If Rusal cannot reach a new agreement of the same scale with other buyers, it may lead to more Rusal entering warehouses on the London Metal Exchange, which may increase pressure on global prices during periods of weak demand.
However, Nagel stated that the company's stance may change depending on how the situation in Ukraine develops. He said that you cannot foresee every situation involving policy changes. So we need to review policies based on what's happening in the world. If Ukraine is at peace tomorrow and the world is satisfied with people doing business with Russia again, then Glencore will participate.
Previously, there were reports that one of Glencore's biggest competitors, Trafigura Group, was in negotiations to ensure metal supply from Russian aluminum. Trafigura Group has stated that it will comply with the sanctions regulations, while Russian aluminum has not been subject to Western sanctions.
For Glencore, ending its relationship with the Russian giant would mean a significant change, as metals from the Russian aluminum industry have supported Glencore's dominant position among global aluminum traders for many years. This agreement is crucial for Glencore as unlike many other commodities such as copper and coal, Glencore does not have its own aluminum production assets.
In 2020, RUSAL announced a $16 billion deal that would sell approximately one-third of its production to Glencore. At that time, Russian aluminum company stated that the transaction would continue until 2024 and had the option to extend it until 2025.
Nagel said that Glencore does not need to reach a new agreement with Russia to provide services to its customers or shareholders. Last year, energy profits drove Glencore's trade profits to a record $6.4 billion. Nagel said that our policy last year was very good, and we achieved mythical achievements in this year by trading non Russian materials. Therefore, we have provided services to the world and our trade business has yielded great returns.
Glencore still owns 10.6% of the shares of EN+International Group, the parent company of Rusal. Glencore has previously stated that in the current environment, there is no realistic exit method.
