The Aluminium group’s underlying earnings of USD 773 million were USD 1,333 million improved over the loss recorded in 2009. This was principally as a result of higher exchange traded aluminum prices. The overall impact of price was to increase earnings by USD 1,569 million compared with 2009.
This was partly offset by adverse currency movements of USD 391 million mainly from the strengthening of the Canadian and Australian dollars against the US dollar. The improvement in earnings was also attributable to higher sales of value added aluminum products and cost savings from lower input prices for caustic, coke and pitches in the first part of the year, partly offset by inflation and higher energy costs.
The 2010 spot aluminum price averaged USD 2,173 per tonne an increase of 31% on 2009. The aluminium market benefited from higher premiums in 2010, reflecting the combination of a robust recovery in end use demand in developed economies and the continued roll over of inventory financing positions amidst a prolonged period of low interest rates.
Bauxite production was nine per cent higher for the full year in line with rising third party demand. Alumina production increased three per cent on 2009 when production cutbacks were made, primarily at the Vaudreuil refinery.
Full year aluminium production was in line with 2009. Kitimat output was reduced due to the closures of lines 7 and 8 in September in preparation for the modernization project. Laterrière returned to full production at the end of September following a power outage in July which forced the temporary closure of one of the plant’s two potlines. The loss of metal production during the partial shutdown was around 24,000 tonnes. Other movements included higher production at NZAS following a transformer failure in 2008, which impacted 2009 and a gradual return to full capacity at the operating UK smelters, partly offset by the cessation of smelting activities at Anglesey.
Low snow and rain levels in the Saguenay region of Quebec during the H1 of 2010 led to reduced power generation, resulting in the need to purchase additional power under a specially negotiated power block from the state utility over a 12 month period. The impact on EBITDA in 2010 was approximately USD 117 million.
Rio Tinto Alcan has implemented a metal sales hedging strategy to protect the downside risk of three higher cost smelters, representing approximately eight per cent of forecast production in 2011.
Rio Tinto Alcan announced USD 347 million project to increase the annual production capacity at its aluminium smelter in Straumsvik, Iceland following the completion of a long term energy supply agreement. This modernization project is expected to boost production capacity from 190,000 tonnes to 230,000 tonnes. On October 1, a further USD 140 million investment was announced in a leading edge casting facility to produce valueadded billet at ISAL.
On 14 December, Rio Tinto announced that it is to invest in its Canadian aluminum smelters to improve production efficiency through modernization and expansion. An initial investment of USD 758 million will be spent on completing the first phase of the AP60 plant in Saguenay Lac Saint Jean, Quebec. An additional USD 300 million will be invested for further construction in preparation for the anticipated USD 2.5 billion modernization of the Kitimat smelter in British
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