The aluminium industry is an extremely competitive and highly consolidated sector with six of the largest producers accounting for over 40% of global output. This is largely explained by the high entry barriers that are related to the specifics of aluminium production.
The process of aluminium production includes bauxite extraction, production of alumina and smelting of aluminiun. The scarce bauxite resources have already been split among the key aluminium producers. Moreover, the extraction of bauxites requires billions of investment. On top of that, aluminium-producing companies need to own proprietary technologies and have steady access to cost-competitive energy.
Economic crisis of 2008 triggered a temporary yet sharp drop in demand for aluminium from its major consumers, in particular from transportation and construction industries. Even though cuts in production were made, the supply didn’t shrink to the same degree. As a result, during this time, excess aluminium was accumulated and much is still stored in warehouses today keeping considerable pressure on international aluminium prices.
RUSAL believes that the global aluminium industry requires more discipline in order to restore demand/supply balance. There is a set of tools available in order to achieve that from cost control to suspension of production at the least efficient smelters.