Rusal Wins $275-million Damage Award from Tajikistan

A Swiss tribunal has found that Rusal (EPA:RUSAL), the Russian aluminum giant, is owed $275 million from Tajik Aluminum Company (TalCo), Tajikstan’s largest enterprise.

According to Eurasianet.org, the tribunal found TalCo in breach of two 2003 agreements with a subsidiary of Rusal. Under the agreements, the subsidiary, Hamer Investing Ltd., had supplied TalCo raw materials, for which the state-run Tajik company failed to pay.

TalCo was thus ordered by the tribunal to pay Rusal damages of over $112 million, about $147 million in interest, and nearly $15 million in legal fees, according to a statement from Rusal.

TalCo is the largest aluminum smelter in Central Asia, while Rusal has 26 smelters/refineries and 8 bauxite mines; Rusal produces 9 percent of the world’s aluminia and 8 percent of global alumina production.

Other company news

Ormet Corp (OTCMKTS:ORMTQ) has shut down its Hannibal smelter following a decision by the Ohio Public Utilities Commission (PUC) to approve only a portion of the electricity rate relief sought by the US aluminum producer. Platts reported that nearly 1,000 workers were laid off at the smelter, which produced at a rate of 260,000 metric tonnes a year. Ohio Governor John Kasich blamed low aluminum prices for the closure and suggested the state has already done enough to help the embattled company.

“The PUC lowered Ormet’s power costs to $50/MWh, less than the $57.99/MWh it has been paying to American Electric Power, but still more than the $45.99/MWh Ormet said it needed to keep Hannibal in partial operation for the remainder of 2013,” Platts reported.

Ormet is the second aluminum smelter to be shuttered in Ohio in recent years; Century Aluminum’s (NASDAQ:CENX) Ravenswood plant met the same fate in 2009, said Charleston Daily Mail. The publication quoted The Wall Street Journal as saying that aluminum companies in several states have used the threat of shutting down and laying off hundreds of workers as a bargaining chip for cheaper power.

Shares in Alcoa Inc. (NYSE:AA) have been climbing since the large multinational aluminum producer announced its quarterly earnings on October 8. CNBC reported that despite weak aluminum prices, Alcoa’s net income was $24 million, or 2 cents a share, compared to a loss of $143 million, or 13 cents a share, in the year-ago quarter. CNBC reported Alcoa CEO Klaus Kleinfield as saying that the firm is not expected to be affected by the slowdown in China and is in fact increasing its demand projection there by 12 percentage points.

Market update

The aluminum price on the London Metals Exchange has risen about US$110 a tonne over the past month, although the price retreated over the past week to settle at $1,804.50, on a cash bought basis, on October 15.

The three-month Asian benchmark price for aluminum yesterday was sitting at $1,854.59.

Metal-Miner reported that the cash price of primary Indian aluminum saw the biggest increase at 0.9 percent on October 14, while in China, the cash price declined by 0.1 percent.

In the United States, aluminum shipments rose 8.2 percent in September compared to September of 2012, to 121,700 MT, according to Platts. The US currently has three months of aluminum inventory on hand, or 362,700 MT, which is 3.7 percent less than the same period last year.

In Japan, aluminum stockpiles declined 7.4 percent in September, the most in three months according to trading company Marubeni Corp (TYO:8002), as per MetalMiner.

And in China, the government is taking action to address overcapacity in the aluminum sector by raising power tariffs on aluminum smelters by 10 percent; encouraging smelters to sign long-term power supply contracts with power plants; encouraging Chinese companies to build aluminum smelters overseas where energy is rich; elimating prebaked anode cells; and forbidding local governments to introduce preferential electricity price policies, according to Shanghai Metals Market.

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.