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Rio Tinto Alcan earnings bolstered by high premiums

Keywords: Tags  Rio Tinto Alcan, Midwest premiums, London Metal Exchange, aluminum, Michael Cowden


CHICAGO — Despite lower aluminum prices, Rio Tinto Alcan Inc.’s earnings surged in 2013 thanks in part to higher regional premiums and financing deals that kept metal in warehouses and away from physical consumers.

The Montreal-based aluminum producer saw underlying earnings jump to $557 million from $54 million in 2012, according to parent company Rio Tinto Plc’s earnings data released Feb. 13.

Aluminum premiums "performed strongly" in 2013 as a result of a "balanced physical supply/demand picture" despite "significant" inventories of metal in London Metal Exchange-listed warehouses, which aren’t necessarily available to the physical market, Rio Tinto said.

"A significant portion of aluminum inventories remain locked in financing deals and so unavailable for immediate physical delivery," the London-based metals and mining conglomerate said. "As a result, regional premia for physical delivery of aluminum remained at record levels."

The jump in earnings came despite LME cash aluminum prices slipping to an average of $1,845 per tonne last year, down 9 percent from 2012 levels, Rio Tinto said.

AMM’s Midwest aluminum premium currently stands at 20 to 20.5 cents per pound (amm.com, Feb. 13). Although some market players expect premiums to edge down, they remain about 74 percent above the 11.3- to 12-cent-per-pound level seen a year ago and more than double the 7.8 to 8.4 cents per pound seen on Feb. 13, 2012.

Rio Tinto Alcan’s London-based parent reported full-year net income of $3.67 billion, reversing a year-earlier net loss of $3.03 billion.


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