Rio Tinto (ASX, LON, NYSE: RIO) has become the first major mining company to announce it was cutting all ties with Russian businesses, joining a massive exodus of Western companies since Moscow’s invasion of Ukraine.
The world’s second largest miner, which operates aluminum refineries in Russia’s east together with aluminum producer Rusal International, had said it wanted to keep its relationships with local business “steady”. This, as the company was trying to avoid diesel supply issues at its giant Oyu Tolgoi copper-gold mine next-door, in Mongolia.
Rio Tinto, however, in an emailed statement, said on Thursday it was “in the process of terminating all commercial relationships it has with any Russian business.”
The miner is reviewing its 80-20 joint venture with Rusal in Queensland Alumina (QAL), which runs a refinery in the Australian northeast state and also plans to stop supplying bauxite and sourcing alumina from a Rusal’s Aughinish refinery in Ireland, which is a key supplier to Europe’s aluminum sector.
Rio was, historically the largest supplier to the Aughnish plant, but the company has been looking to make its supply chain more resilient after the previous US sanctions to Russia, in 2018. It’s not clear what percentage of the plant’s bauxite supply and alumina production it currently ships, but Europe’s automakers have reasons to be nervous.
Carmakers around the world were already forced to postpone the production of millions of new vehicles in 2021 due to the semiconductor shortage. An aluminum crisis could severely compound that problem.
Thursday’s decision comes as more western businesses turn their backs on Russia over the ongoing invasion of Ukraine. The conflict has already killed thousands and displaced more than two million people, quickly becoming the largest humanitarian crisis in Europe since World War II.
Sanctions on Russia have largely excluded the energy sector, where the country is a major player — world’s third-largest oil producer and second of natural gas.
Oil and gas companies, already feeling the heat from climate activists to invest in renewable energy, were among the first companies to announces their exit from Russia as they realized the potential risks to their reputations by continuing with business as usual.
Aluminum prices soared on the London Metal Exchange on the news of Rio’s plans and the UK government Thursday sanctions to Russian billionaire Oleg Deripaska, who has a stake in Rusal’s parent En+ Group International PJSC.
The metal, which hit a record high earlier this week, jumped as much as 5.8% to $3,535 per tonne.
Deripaska is one of the seven Russian oligarchs targeted by the UK in an estimated £15 billion ($20bn) sanction hit.
Earlier this week, Royal Dutch Shell Plc stopped buying oil from Russia and said it would cut links to the country entirely while the United States stepped up its campaign to punish Moscow by banning Russian oil and energy imports.