Glencore, Rusal extend aluminium supply contract following fractional trade volumes

In a move to bolster their ongoing partnership, Swiss-based trading house Glencore and Russian aluminium giant Rusal have agreed to extend their long-term supply contract into next year. According to a source with direct knowledge of the matter, the volume traded under the agreement thus far has reached only a fraction of its maximum potential.

The contract between Glencore and Rusal, the world's largest aluminium producer outside of China, has been renewed. This renewal ensures continued collaboration between the two industry giants and underscores the mutual benefits they derive from this partnership. Initially set to expire this year, the contract has been renewed, reflecting both parties' confidence in the future of the aluminium industry.

However, this morning, when we reached an official of Rusal, the person declined to comment on this matter. According to our information, Glencore is yet to comment.

According to an anonymous source, Glencore is legally obligated to uphold the contract since Rusal has not been directly affected by Western sanctions.

AL Circle’s industry-focused report, “Global Aluminium Industry Outlook 2024,” revealed that in the initial months of 2024, the demand and price of aluminium will mirror those of 2023, but gradually, as we slip towards H2 2024, the moment is anticipated to gain momentum.

The report also notified that the Metals and Minerals Price Index of the World Bank witnessed a marginal decrease of 0.13% in the fourth quarter of 2023, marking a continuation of the consistent declines observed since early 2022. This downturn is attributed to a deceleration in economic activity in significant global economies, leading to a subdued demand environment alongside ongoing recoveries in the supply of certain base metals. Projections indicate a 5 per cent decline in metal prices for 2024, following a nearly 10 per cent decrease in 2023 on a year-on-year basis. It is anticipated that prices will stabilise in 2025 on a year-on-year basis.

The London Metal Exchange (LME) issued a comprehensive prohibition last month on Russian aluminium, copper, and nickel produced from April 13 onwards to comply with new sanctions imposed by the US and the UK following the Ukraine-Russia geopolitical crisis in 2022.

According to calculations by Reuters based on regulatory filings, Glencore purchased approximately one-third of the maximum 5.24 million tonnes during the first four years of the contract up to last year. "The rest of the volumes will be collected at a later time," the source stated.

In 2023, Glencore purchased $1.06 billion worth of aluminium under the contract, significantly less than the maximum amount of $3.93 billion, as stated in Rusal's annual report last month.

According to a Reuters calculation, Glencore's purchases from Rusal last year would amount to approximately 459,000 tonnes, based on the average 2023 LME cash price of $2,307 per tonne. This estimate is rough, as it does not account for regional premiums that vary depending on the shipment destinations. In 2023, Rusal's total aluminium sales were 4.2 million tonnes.