Rio Tinto to sever all commercial ties with Russian business

Calling into question the fate of its alumina joint venture with Moscow-based United Co. Rusal International PJSC.
Image: Chris J. Ratcliffe/Bloomberg

Rio Tinto Group has joined the ranks of multinationals shunning Russia following the country’s invasion of Ukraine, calling into question the fate of its alumina joint venture with Moscow-based United Co. Rusal International PJSC.

“Rio Tinto is in the process of terminating all commercial relationships it has with any Russian business,” a spokesman for the global miner said in an emailed statement Thursday.

The London-based company operates the Queensland Alumina Ltd. joint venture with Rusal, which holds a 20% stake. While Rio is evaluating its options regarding the partnership with Rusal, it said last week that it had the “appropriate structures” in place to ensure Queensland Alumina’s operations would not be disrupted.

The global miner is the latest in a wave of companies to cut ties to Russia. Amazon.com Inc. announced Tuesday it had stopped shipping products sold on its retail website to customers based in Russia, while McDonald’s Corp. has temporarily closed all of its 850 outlets in the country. Resources giants including Shell Plc, BP Plc and Exxon Mobil Corp. are also pulling out of operations in Russia.

Rio has no operational assets or employees located in Russia or Ukraine, the company said. Rio’s shares ended the Sydney session down 7.7% at A$110.61.

Rio’s announcement could add to the crunch in the aluminum market, where prices are already at historic highs, if it curtails Rusal’s supply of alumina from Queensland Alumina.

Russia, one of the biggest producers of aluminum outside of China, already faces pressure on output after Rusal suspended shipments from an alumina plant in Ukraine which supplies the feedstock to its smelters in Russia. The aluminum market could lose 900 000 tons of annualised output in the event of a prolonged closure at the Ukraine facility, according to analysts at Goldman Sachs Group Inc.

Rio generated $12.4 billion in revenue from its aluminium business in 2021, including from Queensland Alumina, making it the company’s second-biggest earner after iron ore.

“Rio’s move could keep things tight in the aluminum market until trade flows can adjust,” said Peter O’Connor, mining analyst at Shaw & Partners.

Meanwhile, Rusal’s 57% owner En+ Group International PJSC is considering hiving off its international operations into a new company that would no longer have Russian ownership, according to people familiar with the matter. Billionaire Oleg Deripaska is the majority shareholder in EN+ and was also the founder of Rusal in the 1990s. He has been subject to US sanctions since 2018.

Isolating Putin

It would be difficult for Rio to stop using products from Russia for its Oyu Tolgoi copper operation in Mongolia, Bold Baatar, head of the group’s copper business, was quoted as saying by Reuters at a conference in Houston on Wednesday.

While Rio’s announcement on Thursday was unlikely to have a large material impact on its bottom-line, it was still welcome, Dan Gocher, the director of climate and environment at shareholder advocacy group Australasian Centre for Corporate Responsibility, said by phone.

“Administering these types of economic sanctions and blocks is the only way we can isolate President Putin,” Gocher said. “We know he receives enormous support from the oligarchs and businesses that surround him, and Rusal is definitely one of those.”

Another Australian firm, contractor Worley Ltd., said Thursday it had begun the withdrawal of its services provided in Russia and would not enter into new contracts.

© 2022 Bloomberg

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