LONDON United Co. Rusal (UC Rusal) will convert its loss-making Russian aluminum smelters to the production of vehicle components, as well as rolled and cable products, it said Sept. 30.
To fund the transformation, the Moscow-based aluminum producer has signed a memorandum of intent with Russian state-owned development bank Vnesheconombank (VEB).
New production facilities will be constructed at the Bogoslovsk, Urals, Nadvoitsy, Kandalaksha, Volkhov and Volgograd aluminum smelters, all part of UC Rusals Aluminium Division West. New facilities are also feasible at the companys other Russian sites.
Finished goods will be supplied to the Russian market, where Russian and foreign carmakers have commitments to boost the share of Russian-made parts in their supply chains.
Under the agreement, UC Rusal will attract investors, provide existing industrial infrastructure and ensure aluminum supply to the facilities.
By converting facilities to downstream production and attracting financing from VEB, UC Rusal hopes to return these smelters to profitability.
However, the impact on London Metal Exchange aluminum prices is likely to be minimal against the effect that would be seen if the company cut the production altogether.
A version of this article was first published in AMM sister publication Metal Bulletin.