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RUSAL is the largest aluminium producer outside China. Its smelters are located mainly in Siberia, next to hydroelectric power plants, and this is no coincidence: smelting aluminium requires an enormous amount of electricity. The shares trade on the Moscow Exchange under the ticker RUAL.
Aluminium production is an electrolysis process in which electricity accounts for a substantial part of the cost of production. Metallurgists say that aluminium is "canned electricity": cheap energy is almost the same thing as cheap metal. Siberian hydropower plants give the company one of the lowest energy costs in the world, and this is its main structural advantage.
The weak point of the chain is alumina, the raw material for smelting. The company's self-sufficiency in it is incomplete, and some of its foreign assets have become inaccessible, so the raw material has to be bought at a higher price than before.
A separate and very large item, unrelated to aluminium, is a stake in another metals company. In some years the dividends on this stake affected RUSAL's cash flow no less than its own sales did.
Smelting of the metal at Siberian plants next to hydroelectric power stations.
Mining and processing of raw materials — a link in the chain that is not fully secured.
Alloys, wire rod, foil and other downstream products sold at a higher price than ingot.
A large holding in a metals company, the dividends on which affect cash flow.
Strengths and weaknesses describe the business itself. Opportunities and threats describe what may happen around it.
The company mines and processes the raw materials for aluminium, smelts primary aluminium at its Siberian plants and makes alloys and downstream products from it. A substantial part of the metal is exported.
Because smelting aluminium is electrolysis, which requires a great deal of electricity: it makes up a noticeable share of the cost of producing a tonne. Cheap hydropower next to the plant is the main way to make the metal competitive.
It is aluminium oxide — an intermediate raw material obtained from bauxite. It is from alumina that metallic aluminium is smelted by electrolysis, which is why self-sufficiency in it is critical for the cost of production.