RUSAL SWOT and PESTLE Analysis

Strength

1. One of the largest producers of aluminum, alumina and other related alloys: Rusal is a global brand from Russia dealing in both upstream to downstream segment of aluminum, The company is involved in exploration of bauxite and nepheline ore mines, production of aluminum, alumina through refineries. Rusal also produces alloys of aluminum and other products like wheels, foils, packaging grade aluminum, etc. Rusal is one of the largest aluminum producers in the world and it was the 3d largest producer in 2019 with production of 3.8 million tons, which is roughly 5.9% of the world’s total aluminum production. Rusal produced 7.9 tons of alumina in 2019, which was roughly 6.3% of the global alumina production. Rusal has 2 bauxite mines and 1 nepheline mine in Russia. Asides, Rusal has bauxite mines in Jamaica, Guyana and Guinea too.

2. Self-sufficiency in production: Rusal has a strong presence in the upstream business of the aluminum production which makes it a self-sufficient company and supplies for the midstream and the downstream businesses become ample. The company has 2 bauxite mines in Russia and 1 in Jamaica, 3 in Guyana and 1 in Guinea. The productions of the bauxite mines suffice 75% of the total requirements in alumina refineries. The company has also constructed the Hydel Power Plant under the BEMO project in JV with RusHydro. The plant suffices the energy requirements of Boguchansky Aluminum Smelter in the Krasnoyarsk region of Russia. Other plants of Rusal are also located to close proximities of power plants. Besides, the company has innovated efficient technologies (like baked anode) of smelting to increase production efficiency up to 30%. Rusal is swiftly installing its home grown highly efficient baked anodes in its smelting facilities. It has already been installed and tested successfully in Volgograd Aluminum Smelter. The company is also developing an Anode Factory with smelting facility at Taishet, where construction of facilities resumed in 2017 after closure in 2009 due to unfavorable market conditions.

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Weakness

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Opportunity

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Threats

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Political

1. USA imposing excess tariff on imported aluminum: In 2018, USA increased tariffs on imported aluminum and steel in the USA. An excess tariff of 10% was imposed by the US. Later, in 2020, even aluminum derivatives (products made of aluminum) were also included in the tariff. Rusal has no infrastructure in the USA for the production or exploration of bauxite; hence it faced heat with regards to this decision of the US Government. In FY 2017, from sales in USA alone Rusal generated revenue worth US$1440 million, which sharply dropped by 38% y-o-y to US$887 million in 2018 and further, declined by 26% y-o-y to US$649 million in FY 2019. However, the tariff skyrocketed the price of aluminum to its peak, buoyed by high global demand. Increased price of aluminum churned more revenue in upstream business which increased the annual revenue of Rusal to touch the $10 billion mark for the first time in FY18; However, at a later stage it had negative impacts only, as Rusal produced 7% of worlds aluminum in 2018 which further dipped to 5.9% in 2019.

2. Relaxation of sanctions imposed by the US: Russia had waged a war to annex Crimea in 2014. This resulted into multiple sanctions on Russian companies for trade with US. Rusal was also a part of the sanctions. The ban increased prices of aluminum in 2018. However, in 2019, USA annulled the ban sanction on Rusal. This resulted in change of chairman, changes of board members and decrease in shareholdings of some promoters of the company, as condition to lift the ban. The company had already lost ground in the US due to the ban and raised tariffs on aluminum. The annulment of ban further dropped the aluminum prices as Rusal is among the top 3 aluminum producers in the world and the ban’s annulment opened new doors of supply of Siberian bauxite reserves into the US Market. Although, Rusal’s revenue from the US in 2019 declined by more than half of what it was in 2017. Currently, the world is struggling with Covid-19 and economic activities have slowed down. Rusal is going to take enough time and requires meticulous bonding with its customers in the US to gain back, lost market share. However the foil business grew by 1.2% to 4294 thousand tons due to relaxation of sanction.

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Economic

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Social

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Technological

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Legal

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Environmental

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