Strong Foundation for Growth, Decarbonisation and Shareholder Returns
Aluminium
Higher prices, recovery of VAP demand and volumes
Underlying EBITDA 2021 vs 2020
$ million
5,500
4,000
2,977
4,564
258
(270)
(34)
(261)
(269)
500
4,382
(50)
(121)
2,152
2,500
1,000
2020
underlying
Price
Exchange rates
Energy
Inflation
EBITDA
Flexed 2020
underlying
EBITDA
Volumes
& Mix
Cash costs
One-offs
Other
2021
underlying
EBITDA
In 2021, aluminium prices rallied to multi-year highs, following a firm recovery in global demand
and extensive power-related supply disruptions in China, which led to a global market deficit.
This rebound in sales prices, together with increased demand for value-added product (VAP),
were the key drivers for our aluminium business to more than double underlying EBITDA and
deliver a substantial increase in cash flow.
Underlying EBITDA of $4.4 billion, which was 104% higher than 2020, benefited from the stronger
pricing environment, in particular for primary metal and alumina, and higher product premiums for
primary metal. This was only partly offset by the impact of stronger local currencies, lower bauxite
and alumina shipments and cyclical cost inflation for coke, pitch and alloys. This increased our
industry-leading underlying EBITDA margin to 38%.
We achieved an average realised aluminium price of $2,899 per tonne, 49% higher than 2020
($1,946 per tonne). This comprised the LME price, a market premium and a product (VAP)
premium.
-
The cash LME price averaged $2,480 per tonne, 46% higher than 2020, while in our key US
market, the midwest premium duty paid increased by 119% to $584 per tonne (2020: $267 per
tonne).
Our VAP sales represented 50% of the primary metal we sold (2020: 43%) and generated product
premiums averaging $230 per tonne of VAP sold (2020: $213 per tonne).
We generated $3.6 billion in net cash from operating activities, reflective of the higher underlying
EBITDA achieved, net of a $0.5 billion build in working capital, driven by the higher pricing
environment and supply chain constraints.
Free cash flow increased by 155% to $2.3 billion.
Although we are broadly balanced in alumina, approximately 2.2 million tonnes of our legacy
alumina sales contracts are exposed to a fixed linkage to the LME price. These contracts date
back to 2005 or earlier, and the majority expire between 2023 and 2030.
Rio Tinto
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