Alcoa buys into Russian aluminium market

Related tags Alcoa Aluminium Russia

Aluminium packaging firm Alcoa, just named as one of the top three
most sustainable corporations in the world, has bought two
factories in Russia with a view to both dominating the region and
using its rich aluminium resources to expand globally, reports
Chris Mercer.

Alcoa paid $257 million in cash for the two plants - one in Samara and one in Belaya Kalitva 500 miles south of Moscow - and the company plans to spend a further $80 million upgrading the facilities in order to serve a number of industries from packaging to aerospace.

The move is part of Alcoa's $2.5 billion capital spending plan for 2005. Alain Belda, Alcoa chairman, said: "We have a proven track record of taking factories - such as those in Hungary, Spain and Italy - integrating them into Alcoa, and putting them in a strong position to compete globally and grow profitably.

"These countries have provided additional growth opportunities in to Alcoa once we began operating them and we look forward to the chance to grow further in Russia,"​ he said.

Alcoa, which produces a number of consumer brands such as Reynolds Wrap and Baco household wrap, expects to hit the ground running and believes it can make get $40 million in earnings from the Russian factories by the end of 2005.

Aluminium was named by market analyst group Euromonitor​ as one of the few metal food packaging types which may have a future in Russia, despite many metals' heavy, bulky and costly nature putting the category into "terminal decline"​.

Aluminium is useful for preserving foods, used widely as an inside wrapping for premium confectionery goods, and aluminium trays could cling on to an expanding fast food and ready meals market in the country, says the report.

Most aluminium produced in Russia, however, is exported, and Alcoa sees its two new plants as a critical cog in a distribution and manufacturing network already spanning every continent. Belda said he wanted to use them to better serve Europe, America and Asia as well as the domestic market.

Global aluminium production is still on the rise, moving from 21,935 metric tons in 2003 to 22,591 in 2004, according to the International Aluminium Institute. And Alcoa has bought into a lucrative new area; Central and Eastern Europe is the third biggest regional producer of aluminium at 4, 138 metric tons in 2004, behind North America and Western Europe.

Aluminium is completely recyclable and environmentally friendly packaging has become a major growth area, reflecting consumer and retailer awareness of the issue of waste disposal.

Alcoa's newly crowned position as one the world's most sustainable companies will also give it an edge over the competition. The title was awarded at the World Economic Forum in Switzerland because of Alcoa's attention to the environmental, social and economic impacts of business.

Both of the company's new Russian plants are working towards the ISO 14001 certification in Ecological management.

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