Key Strategies and Future Prospects for Raw Material Diversification in Global Aluminum Production: A Case Study of UC RUSAL

Abstract

Aluminum’s unique properties have led to its widespread use across multiple industries, including transportation, aviation, power generation, construction, and food packaging. In recent years, global aluminum consumption has risen significantly, with China experiencing particularly sharp growth in both production and demand. In Russia, the aluminum industry is dominated by UC RUSAL, which consolidates all Russian aluminum and alumina production facilities, along with several international operations and mining assets. Despite its global presence, the company remains heavily reliant on imported raw materials (approximately 50%) for alumina production, resulting in reduced operational efficiency and declining output. This dependency has necessitated the exploration of strategies to diversify raw material sources across different stages of the aluminum production value chain. This study identifies and classifies key diversification options for global aluminum companies, focusing on secondary aluminum production, primary aluminum production, and alumina extraction from mined minerals, industrial waste, and by-products. The options were evaluated based on predefined criteria (feasibility, cost per Mg of alumina, logistics, alumina output, and economic security), and two options were selected. The research substantiates the feasibility of diversifying production through nepheline utilization. For the medium term, an economic efficiency assessment was conducted for a proposed 30% capacity expansion at the Pikalevo Alumina Refinery. Additionally, long-term opportunities for increasing aluminum output were identified, including leveraging foreign assets while accounting for associated risks.

1. Introduction

1.1. Analysis of the Key Issues in the Global Aluminum Industry

In recent decades, global industries including automotive, construction, electrical engineering, and aviation have demonstrated a consistent upward trend in aluminum consumption. Between 2013 and 2022, global aluminum demand grew by 33%, rising from 51.7 million Mg to 69 million Mg [1,2], while production increased by 31% from 52.3 million Mg to 68.5 million Mg during the same period [1,2]. Remarkably, the aluminum market has maintained stable supply-demand dynamics even during economic crises. A case in point is 2020, when global demand (excluding China) declined by 8.9% to 26 million Mg during the COVID-19 pandemic, while Chinese demand simultaneously increased by 3.9% to 37.9 million Mg [3]. That same year witnessed modest global production growth of 0.2%, with China achieving a 3.9% increase and Russia maintaining stable output levels of 3.775 million Mg [3]. Russia’s aluminum production capacity currently stands at 4.07 million Mg, complemented by an alumina production capacity of 3.26 million Mg, with 71.5% of domestically produced aluminum being exported primarily to China, Turkey, and South Korea.

Future demand projections from various governmental and analytical agencies indicate continued growth. Statista forecasts global aluminum consumption reaching 78.4 million Mg by 2029 [4], while Russia’s Strategy for the Development of the Metals Industry until 2030 predicts global consumption will rise to 121 million Mg by 2030 [5]. According to Gazprombank, global consumption may reach 148 million Mg by 2040 [6].

Russia’s Strategy for the Development of the Metals Industry until 2030 outlines two potential scenarios for domestic production growth: a baseline scenario projecting expansion to 4.9 million Mg and a conservative scenario anticipating growth to 4.47 million Mg [5]. This anticipated demand increase stems primarily from several key industries: aviation (driven by the localization of component and aircraft production), automotive manufacturing, defense, as well as electrical engineering and construction sectors. However, these projections fail to account for the current shortage of domestically produced alumina, which has already necessitated temporary production reductions at UC RUSAL facilities.

Bauxite is the conventional raw material for producing alumina, which is subsequently used to produce aluminum. According to UC RUSAL’s 2021 annual report, the company extracted a total of 15 million Mg of bauxite, with only 37.78% sourced domestically while the remaining 62.28% was imported from Guinea and Jamaica [7]. This import dependence results from two primary factors: the lower alumina content in Russian bauxite deposits and challenging mining conditions. Most Russian bauxite reserves prove unsuitable for processing via the more efficient Bayer method, while the higher costs associated with underground mining operations further disadvantage Russian sources compared to imported open-pit mined bauxite.

The reliance on bauxite imports introduces multiple risk factors, including substantial transportation costs, political instability in supplier nations that could disrupt production, potential sanctions affecting maritime bauxite transportation (including freight and insurance complications), possible increases in shipping tariffs, and the considerable distance between the company’s alumina plants and seaports [8]. These combined factors could ultimately render bauxite usage economically unviable should certain risks materialize. This vulnerability manifested clearly in 2022 when production costs surged by 30.2%, with alumina expenses alone accounting for 17.1% of total costs (an increase from 9% in 2021) [2]. The absolute cost of alumina rose by 149.3% year-over-year to USD 1847 million in 2022 [2]. By 2023, alumina’s share of production costs had grown to 19.4%, and by 2024, supply shortages coupled with rising purchase prices forced temporary reductions in aluminum output.

Among various aluminum-containing minerals that could potentially address alumina scarcity, nepheline emerges as one of the most promising alternatives to bauxite [9]. While nepheline has not gained widespread adoption in the global aluminum industry due to its lower alumina content, Russian researchers have developed specialized processing technologies that enable economically viable utilization of nepheline through complex processing methods [10,11,12], particularly for apatite and nepheline ores from the Kola Peninsula [13,14,15]. To mitigate alumina supply challenges, UC RUSAL could pursue several diversification strategies [16,17,18], including developing new bauxite sources, increasing alternative raw material utilization [19], implementing secondary raw material recycling programs, direct alumina procurement, or constructing new alumina production facilities.

It should be noted, however, that not all global practices can be directly applied, as companies differ in their strategies, resources, and operational constraints. For example, UC Rusal cannot simply adopt the approach used by Alcoa. Alcoa’s strategy relies on abundant resources and a strong focus on alumina sales. The company owns numerous bauxite deposits worldwide, and its bauxite mining and alumina production far exceed the requirements for aluminum production, leading it to prioritize alumina sales. In contrast, UC Rusal focuses on aluminum production and sales, with a strategy centered on integrating production capacities across all stages of the value chain.

Similarly, UC Rusal’s strategy differs from that of Rio Tinto. UC Rusal produces only aluminum, whereas Rio Tinto is a diversified producer of various non-ferrous metals.

1.2. Literature Review

Within academic literature and corporate practice, diversification is widely recognized as a distinct business strategy, particularly prevalent in advanced economies [20,21,22]. The strategic emphasis of diversification has evolved significantly since the 1960s, transitioning from initial focuses on market and industry expansion (to mitigate risks and enhance competitiveness and profitability) to contemporary priorities centered on bolstering corporate resilience against external shocks and stabilizing cash flows (as detailed in

Table 1. Conceptual frameworks of diversification as a strategy [compiled by the authors].

Author	Definition
I. Ansoff	A strategy that involves entering new markets or creating new products outside of an organization’s existing operations [20].
A. A. Thompson, A. J. Strickland	An organizational strategy characterized by expansion into unrelated sectors [21].
P. Kotler	The capacity to create and introduce novel products for untapped markets [22].
O. S. Vikhansky	A growth strategy employed when a company faces limitations in expanding within its current market, product line, or industry [23].
E. Yoshinara, A. Sakuma, K. Itami	A risk-mitigation strategy that enhances financial stability during adverse market conditions [24].
A. V. Makarov	A corporate strategy designed to sustain long-term competitiveness by venturing into technologically innovative operational fields [25].

).

Ansoff’s definition remains foundational to diversification theory, encapsulating its core principles: resource reallocation and expansion into novel business domains. The academic literature offers numerous complementary interpretations. Thompson and Strickland’s formulation explicitly addresses corporate expansion into unfamiliar markets or product categories, while Kotler’s broader conceptualization encompasses new product development for new markets. The definitions advanced by Makarov, Yoshinara, Sakuma, Itami, and Vikhansky collectively frame diversification as a strategic transformation of business operations. However, these scholars emphasize distinct objectives, including risk reduction, operational efficiency enhancement, profitability improvement, corporate sustainability, market expansion, competitive advantage reinforcement, or corporate value maximization.

Mining companies operate in a unique ecosystem characterized by high capital intensity, long-term planning horizons, complex technological processes, depleted and limited resource bases, the need to ensure resilience in a turbulent external environment, and negative environmental impacts, which are reflected in the characteristics, specifics, and areas of diversification.

At the same time, a mining company’s diversification must be carried out taking into account ESG (Environmental, Social, and Governance) factors. Approach to assessing ESG factors vary in the number and composition of indicators, the degree of aggregation, the method for calculating the resulting value, and the weighting factors. However, several key frameworks offer a detailed assessment of these factors.

For example, Refinitiv’s ESG rating framework is based on the relative effectiveness of environmental, social, and governance indicators, which are compared depending on the company’s industry and country of incorporation. The assessment takes into account the most significant industry indicators, minimizing distortions associated with the company’s size and transparency [26]. Moody’s (Vigeo Eiris) ESG ratings framework measures the extent to which companies consider and manage ESG factors. Different ESG criteria are analyzed and assessed [27].

The ESG assessment methodology developed by ACRA combines qualitative and quantitative analysis of ESG factors, using weighted averages to calculate final ESG scores based on the importance of each factor for the specific organization being assessed [28]. The MSCI ESG framework evaluates how a company manages these risks relative to its peers in its industry, and also determines the extent to which each industry is exposed to various ESG issues [29].

Within the mining and metals sector, scholars have identified a specialized form of diversification: resource diversification [30,31,32], which specifically examines the utilization of diverse mineral resource types and sources to ensure corporate sustainability [33,34,35]. Ponomarenko et al. analyze seven diversification models consolidated into three primary categories: multipurpose utilization of raw materials, new product development, and enhanced processing, all ultimately aimed at establishing competitive advantages [36,37,38].

Gavrishev, Zalyadnov, and Bikteev propose an alternative classification system comprising three principal directions: expanded product portfolios, utilization of anthropogenic resources, and development of ancillary products or services for external markets [39,40]. Our study advocates for a bifurcated classification distinguishing between product diversification and raw material diversification.

Contemporary global practice demonstrates growing interest in utilizing mineral resources from anthropogenic deposits [41,42,43], mining waste [44,45,46], and processing tailings [47,48,49]. This paradigm aligns with sustainable development principles and circular economy models, thereby providing justification for anthropogenic resource utilization [50,51,52]. Researchers have proposed specific approaches for sourcing valuable and scarce raw materials, including waste recycling [53,54,55], recovering materials from waste that used to be unrecoverable [56,57,58] or cost-prohibitive to extract [59,60,61]. Nevertheless, the academic literature remains deficient in studies examining raw material diversification strategies specific to the aluminum industry, highlighting a gap that requires further scholarly investigation.

One of the most promising directions is the use of alternative raw materials. In the complex processing of nepheline, by-products such as potash, sodium carbonate, and cement are also obtained, the sale of which further enhances economic efficiency [62]. In Russia, nepheline ores are already utilized as raw materials at the Achinsk and Pikalevo alumina refineries. Several studies have focused on improving technologies for the complex processing of nepheline [63], confirming its technological feasibility. Parallel research is being conducted on the potential use of kaolin clays as an alternative raw material in alumina production [64,65].

A particularly promising direction in this field is the exploitation of anthropogenic deposits, owing to the high nepheline content found in the waste heaps of Apatit JSC.

Bruno examines regional industrial pollution by focusing on nepheline, a by-product of apatite beneficiation [66]. This analysis underscores the necessity of processing nepheline not only for alumina production but also to mitigate environmental burdens. The mechanism for utilizing anthropogenic deposits for alumina production is further explored in [67].

Diversification needs and increased resource independence have only recently gained attention in academic literature. Nonetheless, several significant findings have already emerged. For instance, the correlation between imported raw material volumes and prices has been documented, showing that higher prices lead to reduced import volumes [64]. The specific risks associated with reliance on imported raw materials for UC RUSAL have also been analyzed [68].

The beneficiation of apatite and nepheline ores has been extensively studied [69]. Advances in processing technologies, particularly for ores with low concentrations of primary minerals, hold promise for increasing the exploitation of reserves that are currently uneconomical to develop. Contemporary scientific efforts have achieved substantial progress in increasing flotation efficiency for complex apatite and nepheline ores [70,71,72]. A newly developed method for crushing multicomponent materials—demonstrated through apatite and nepheline ores—offers further improvements in processing performance. In scientific publications by V. M. Sizyakov, the prospects of using nepheline at the Pikalevo Alumina Refinery are examined in depth. These studies describe technologies that enable not only economically viable processing of raw materials but also the production of high-quality alumina from nepheline through sintering with limestone [73,74].

1.3. Purpose and Scope of the Work

Consequently, this study aims to identify and economically validate the most promising diversification strategy for UC RUSAL through a structured methodological approach.

The research focuses on two key objectives:

• Identifying potential resource diversification pathways for aluminum companies through the development of viable resource alternatives.
• Selecting optimal resource alternatives for global aluminum producers using UC RUSAL as a case study, employing specialized methodologies and investment analysis techniques.

2. Materials and Methods

The research methodology employed in this study incorporates several approaches, including content analysis of scientific literature, information analysis, synthesis, systematization, grouping, and generalization, as well as mathematical modeling.

The study is based on scientific articles published in high-impact journals, financial and sustainability reports from leading industry participants such as RUSAL (Moscow, Russia) and PhosAgro (Moscow, Russia), news sources covering industry developments, official strategic documents including Russia’s Strategy for the Development of the Metals Industry until 2030, and reports from analytical agencies including Statista (Hamburg, Germany) and Gazprombank (Moscow, Russia).

The research comprises three stages:

• Analysis and classification of potential raw material diversification strategies within the aluminum industry by means of content analysis of corporate annual reports, government policy documents, analytical agency publications, and scholarly articles. The findings were compiled in a table.
• Comparative assessment of raw material diversification strategies applicable to UC RUSAL by means of content analysis, data collection, and three key indicators such as production capacity expansion, viability, and projected economic efficiency. For the most promising areas of diversification, SWOT and PESTLE analyses of the projects were conducted.
• Economic assessment of two diversification strategies relevant for UC RUSAL, including expansion at the Pikalevo Alumina Refinery (PGLZ), construction of a new alumina production facility (LGZ), and enhancement of the company’s own mining operations to secure raw material supply. Cost calculations for each option were derived from established material and energy consumption benchmarks [75] and market prices. The economic evaluation framework compared the projected production costs of each strategy with market prices for alumina, with the difference interpreted as the potential economic benefit. Investment requirements and annual production metrics for each option were sourced from press releases and news reports issued by UC RUSAL. The analysis included calculating key performance metrics such as Net Present Value (NPV), Profitability Index (PI), Internal Rate of Return (IRR), and discounted payback periods. It also incorporated a sensitivity analysis.

3. Results

3.1. Diversification Strategies in the Aluminum Industry

To identify potential opportunities for diversifying corporate activities within the aluminum sector, four key stages of aluminum production (Figure 1) in the value-added chain (VAC) need to be examined: bauxite mining (or alternative raw material extraction), alumina refining, primary aluminum production via electrolysis, and the manufacturing of various value-added products [76]. Leading global players in the aluminum industry—such as CHINALCO, Hongqiao Group, Xinfa Group, and Rio Tinto—are vertically integrated corporations that encompass all stages of the production chain. This integration is essential to ensure operational stability, improve efficiency, and maximize added value. For example, UC RUSAL operates bauxite mining capacities both within Russia and internationally (in Guinea, Jamaica, and Guyana), with bauxite transported to its alumina refineries located in Russia, Ireland, Guinea, and Jamaica. From these alumina plants, the refined alumina is supplied to UC RUSAL’s aluminum refineries in Russia. The company also owns facilities dedicated to producing value-added products such as wheel rims and foil. Since aluminum production is highly energy-intensive, aluminum refineries are typically situated near hydroelectric power plants to utilize environmentally friendly and cost-effective energy sources [77,78]. UC RUSAL’s ownership of hydroelectric facilities exemplifies vertical integration.

The key stage in the production chain is electrolysis, where alumina is used to extract aluminum—an impure form of primary aluminum containing high levels of impurities such as iron, silicon, titanium, sodium, hydrogen, alumina particles, carbon, and cryolite—before refining [79]. The predominant technologies employed involve electrolytic cells with prebaked anodes or self-baking anodes. The diagram illustrates the raw materials required for electrolysis (left), useful products (right), and waste or by-products (bottom). It is important to note that this stage consumes a significant amount of energy; consequently, electricity costs constitute a substantial portion of aluminum production expenses. Alumina can be produced via two main methods: from bauxite or alternative raw materials.

The global aluminum industry predominantly employs the Bayer process—considered highly efficient—yet in Russia, due to high silicon content in domestic bauxites, a modified approach known as Bayer sintering is used. This method involves sintering high-silicon bauxites (with a silica ratio below 7) with limestone. Producing one Mg of alumina through Bayer sintering requires approximately 2.54 to 2.74 Mg of bauxite [75].

Given Russia’s limited bauxite reserves and their low grade, alternative raw materials such as nepheline from the Kiya-Shaltyrskoe deposit and nepheline concentrate from Apatit JSC are also utilized for alumina production. Additionally, nepheline deposits on man-made sites on the Kola Peninsula can serve as raw material sources. Compared to the Bayer process and Bayer sintering, processing nepheline involves higher raw material consumption: approximately 6–8 Mg of limestone per Mg of alumina, 4–5 Mg of nepheline, 5.6 times higher fuel consumption, and 2.8 times higher electricity usage. Despite these challenges, nepheline processing is nearly waste-free: slurry can be repurposed for cement production; mother liquor serves as a sodium carbonate feedstock; and thermal energy consumption is reduced by a factor of 2.6.

Limited access to high-quality mineral reserves—particularly in Guinea where most profitable deposits are controlled by major international corporations—alongside high logistical costs, declining production efficiency, and volatile raw material and aluminum prices underscore the necessity for diversification strategies within aluminum companies to sustain competitiveness on a global scale.

Potential avenues for resource diversification in the aluminum sector include:

• Developing own alumina production capacities (expanding existing facilities or constructing new ones using diverse raw materials);
• Purchasing alumina from third-party suppliers at prevailing market prices;
• Acquiring equity stakes in alumina manufacturing enterprises;
• Incorporating aluminum scrap into production processes.

To illustrate resource diversification options within global aluminum companies—using UC RUSAL as a case study—we gathered data on existing mechanisms for activity diversification based on scientific literature, annual reports, corporate press releases, and news outlets.

These resource diversification strategies are grouped into categories: secondary aluminum production via recycling, primary aluminum production, and alumina production using raw materials, waste, or by-products (see Figure 2 (The most prospective strategies are highlighted in green)).

The primary avenues for diversification in aluminum production are secondary aluminum production through recycling and primary aluminum production from raw materials.

Secondary aluminum production, which relies on recycling aluminum waste (scrap), is not addressed in this study, as the share of secondary raw materials currently accounts for less than 2% of annual aluminum output in Russia. In contrast, countries like Brazil—ranked fourth globally in alumina and aluminum production—recycle approximately 97% of their aluminum scrap [80,81]. There is a growing trend toward recycling among global industry leaders and a significant portion of aluminum will likely be produced from recycled materials over the long term [82,83]. In the Russian context, however, the scrap collection process remains poorly organized, and the issue of ensuring a stable supply of scrap has yet to be resolved. Consequently, scrap recycling alone cannot address the alumina deficit or sufficiently load primary aluminum production capacities. The main advantages of recycling include its near-complete elimination of CO₂ emissions, a 95% reduction in energy consumption, and the avoidance of using raw materials [84,85,86]. These benefits align with sustainable development principles and circular economy models, making recycling a promising direction for future industry growth.

Primary aluminum production from raw materials is based on two processing options: (1) producing alumina from raw materials and (2) producing alumina from waste and by-products. An analysis to evaluate their respective merits is presented below.

3.1.1. Alumina Production from Raw Materials

The expansion of bauxite production at the company’s operational Russian deposits faces significant challenges due to complex geological conditions, a high proportion of underground mining operations, and the high production rates demonstrated by open-pit mines—specifically, Timan Bauxites operate at 112% capacity [87,88]. Long-term production growth is feasible only through substantial investments.

Development prospects for new bauxite deposits within Russia are constrained by several factors: the low quality of domestic bauxites—characterized by high silicon content—limited reserves, and their remote locations relative to existing alumina refineries.

An increase in bauxite output at the company’s existing overseas assets is theoretically possible, as these facilities are underutilized. However, geopolitical tensions in Guyana, along with technological and logistical challenges in Guinea and Jamaica, hinder the ability to operate these assets at full capacity [89].

The utilization of nepheline from primary deposits is restricted by the finite reserves available. Currently, the company mines nepheline at the Kiya-Shaltyrskoe nepheline deposit, with the ore supplied to the Achinsk alumina refinery. The remaining reserves are estimated to last approximately ten years under challenging mining conditions. Although large reserves of nepheline (urtite) are present in the Republic of Tyva, their extraction remains unfeasible at present due to inadequate logistical infrastructure in the region.

3.1.2. Alumina Production from Secondary Materials

The utilization of nepheline derived from man-made deposits presents a promising avenue for future alumina production, given the substantial reserves—estimated at approximately 500 million Mg. Realizing this potential necessitates investments in equipment and infrastructure at the PGLZ to establish a processing line capable of producing nepheline concentrate from these artificial deposits. Currently, the supply of man-made raw materials is monopolized by a single company, which poses risks to the sustainability and stability of this approach. Additionally, the variable quality of the materials supplied introduces further challenges [90,91].

One alternative man-made material for alumina production is ash and slag waste generated from coal combustion. This technology has gained widespread adoption in China [92,93]. One of the key obstacles for its adoption in Russia is the geographical remoteness of alumina refineries from waste-producing stations.

The options mentioned hold future promise, especially recycling. However, they currently require substantial capital investments, extended implementation timelines, and prolonged periods for return on investment.

3.2. Selection and Economic Evaluation of Promising Diversification Strategies

For primary aluminum production, raw material diversification can be achieved through diversifying alumina procurement sources, establishing or expanding in-house production capacities, and acquiring stakes in alumina-producing enterprises.

Table 2. Evaluation of raw material diversification strategies for primary aluminum production [compiled by authors].

Diversification Strategies/ Criteria	Feasibility	Cost per Mg of Alumina	Transportation	Alumina Volume	Economic Security
1. Purchase of alumina	2	2	3	4	1
2. Acquisition of a stake in an alumina producer	3	3	3	2	3
3. In-house alumina production	3	4	4	5	5

and Figure 3 present an expert evaluation of these diversification strategies for primary aluminum production. The options were assessed based on key criteria, including price, feasibility, economic security, alumina volume, and transportation (

Table 3. Criteria for comparing alternative strategies: Interpretation and rating scale [compiled by authors].

Criteria	Rating Scale, Points	Explanation
Feasibility	1	Implementation of the alternative is currently impossible
	2	Implementation involves significant organizational and/or financial challenges
	3	Implementation involves moderate organizational and/or financial challenges
	4	Implementation involves minor organizational and/or financial challenges
	5	No obstacles impede the implementation of the alternative
Cost per Mg of alumina *	1	Cost per Mg of alumina is very high
	2	Cost per Mg of alumina is high
	3	Cost per Mg of alumina is moderate
	4	Cost per Mg of alumina is relatively low
	5	Cost per Mg of alumina is low
Transportation	1	Severe logistical constraints; very high transportation costs
	2	Considerable logistical constraints; high transportation costs
	3	Moderate logistical constraints; moderate transportation costs
	4	Some logistical constraints; relatively low transportation costs
	5	No logistical constraints; low transportation costs
Alumina volume	1	Implementing the alternative would cover only a very small part of the alumina deficit
	2	Implementing the alternative would cover a small part of the alumina deficit
	3	Implementing the alternative would cover a major part of the alumina deficit
	4	Implementing the alternative would cover most of the alumina deficit
	5	Implementing the alternative would cover all of the alumina deficit
Economic security	1	Implementing the alternative would significantly increase dependence on imported supplies
	2	Implementing the alternative would notably increase dependence on imported supplies
	3	Implementing the alternative would moderately increase dependence on imported supplies
	4	Implementing the alternative would reduce dependence on imported supplies
	5	Implementing the alternative would eliminate dependence on imported supplies

* Cost per Mg was evaluated within the context of each alternative option.

). Each criterion was rated on a scale of 0 to 5.

Currently, further increases in alumina procurement appear unlikely due to several challenges: significant price volatility in the alumina market, limited market supply, high transportation costs, and threats to economic security.

Alumina can be supplied from China, but there are several limiting factors:

• Sourcing alumina from China involves complex organizational processes. Chinese alumina often requires additional processing to meet specific quality standards.
• Alumina imported from China is typically sold at a premium, with prices approximately 30% higher than the global average.
• Deliveries are frequently conducted through extended logistics chains due to Chinese traders’ concerns over secondary sanctions and are further complicated by overloads on the Eastern division of Russian Railways, which increases both delivery time and costs.
• The volume of alumina purchased from China remains insufficient, primarily because China prioritizes its own processing of alumina into aluminum.
• Increasing alumina imports from China would significantly heighten dependence on foreign supplies, thereby posing a threat to Russia’s economic security.

Other potential sources include India and Kazakhstan; however, their mining capacities are limited.

Investing in equity stakes in alumina producers presents additional challenges: there are no guarantees of stable supply, as evidenced by experiences with Chinese investments; the pool of companies is limited; transportation costs and organizational complexities pose major barriers; substantial financial investments are required.

UC RUSAL has already acquired a 30% stake in Hebei Wenfeng New Materials (HWNM), a Chinese company operating an alumina plant with a capacity of 4.8 million Mg per year. Additionally, an agreement exists for a phased acquisition of up to 50% of shares in the Indian Pioneer Aluminium Industries Limited (located in Andhra Pradesh), which has an initial capacity of 1.5 million Mg per year, potentially increasing to 2 million Mg.

The ongoing acquisition of shares in alumina producers, combined with prior experience in asset acquisition, highlights the following key factors:

• The limited number of global alumina refineries constrains share acquisitions; moreover, purchase agreements are complex organizational endeavors. Variations in quality standards across countries further complicate these transactions.
• While acquiring alumina at preferential prices is possible, factors such as necessary investments in plant modernization often diminish the cost advantage.
• Logistics challenges persist when transporting alumina obtained through shareholdings—particularly when involving Chinese companies—due to long supply chains.
• The volume of alumina produced through participation in these enterprises generally remains insufficient to fully address raw material deficits.
• Ownership stakes can positively influence dependence reduction on imported supplies.

Although producing alumina internally involves certain difficulties, it offers advantages over other diversification strategies.

Implementing this approach invariably requires expanding existing capacities or constructing new production facilities.

In this context, alumina can be produced from waste materials and associated components (see

Table 4. Alumina production from waste and associated components. A case study of UC Rusal [compiled by authors].

Diversification Strategy	Brief Description	Advantages	Limitations
Production of alumina from apatite and nepheline concentrate	Sintering apatite and nepheline concentrate from Apatit JSC with limestone yields alumina, sodium carbonate, and cement	1. No significant barriers to implementation: stable supply from an operational facility (Apatit JSC) and existing production capacities 2. Lower dependence on imported raw materials 3. No logistical constraints; low transportation costs 4. Environmentally beneficial by decreasing waste storage 5. Moderate cost per Mg of alumina	1. Doubling the consumption of raw materials—requiring 4 Mg of nepheline and 8 Mg of limestone per Mg of alumina 2. Production volumes are insufficient to significantly mitigate the alumina deficit
Production of alumina based on nepheline from man-made deposits	This option utilizes nepheline from man-made deposits, with reserves at Apatit JSC totaling approximately 500 million Mg, processed through various methods to extract alumina	1. Lower dependence on imported raw materials 2. No logistical constraints; low transportation costs 3. Environmentally beneficial by decreasing the footprint of man-made deposits	1. Significant organizational and financial challenges due to heterogeneity in nepheline content and limited existing processing capacities 2. High production costs per Mg of alumina, requiring substantial capital investments and increased raw material consumption—4 Mg of nepheline and 8 Mg of limestone per Mg of alumina
Production of alumina from coal ash and slag waste	Processing coal ash and slag waste generated from lignite combustion at thermal power plants enables the extraction of alumina suitable for aluminum production	1. Lower dependence on imported raw materials 2. Environmentally beneficial by decreasing red mud and coal ash waste	1. Major organizational and financial hurdles due to limited industrial experience in Russia and insufficient processing capacity 2. Long distances between aluminum plants and waste sources [94] 3. Production volumes are expected to cover only a small fraction of the alumina deficit

), as well as from mined ores—including traditional sources such as bauxite ores and alternative raw materials like nepheline and kaolin.

When evaluating alternative methods for producing alumina from waste, the criteria outlined in Table 3 were employed. While all the presented alternatives have limitations regarding their potential to substitute alumina demand volumes, the production of alumina from apatite and nepheline concentrate is considered to be a practical short-term solution for covering small deficits. This option has a number of advantages: no need for significant capital investments in new production facilities; no logistical challenges; traditional production process.

Among the diversification strategies listed in

Table 5. Alumina production from traditional resources (bauxite ores). A case study of UC Rusal [compiled by authors].

Diversification Strategy	Brief Description	Advantages	Limitations
Production of alumina from bauxite purchased from various suppliers	This approach involves procuring the required volumes of bauxite from third-party suppliers	1. Relatively low organizational complexity 2. The entire deficit in bauxite supply can be covered 3. Moderate cost per Mg of alumina, with bauxite price fluctuations generally less volatile than alumina prices	1. Significant logistical challenges and high transportation costs 2. Increased dependence on imported bauxite supplies
Production of alumina from bauxite mined in countries with previously undeveloped reserves	This strategy entails selecting countries with proven bauxite reserves—such as Vietnam, Sierra Leone, Cameroon, or Mali—and coordinating with governments for exploration, designing mining operations, and developing necessary infrastructure (mining, energy, logistics)	1. Low cost per Mg of alumina 2. The entire deficit in bauxite supply can be covered	1. Significant financial challenges 2. Lack of existing logistics infrastructure from mines to ports in these countries
Production of alumina from bauxite obtained through growth or resumption of mining in countries where the company has assets	This strategy involves resuming operations in Guyana (where RUSAL has capacities but production was halted due to political issues) and increasing output in Guinea by utilizing underused mines	1. Relatively low organizational complexity 2. The entire deficit in bauxite supply can be covered 3. Lower dependence on imported raw materials 4. Moderate cost per Mg of alumina	1. Significant logistical challenges and high transportation costs 2. Some challenges limiting production volumes cannot be overcome
Expansion of bauxite mining within Russia at RUSAL-owned facilities	This strategy involves increasing production at SUBR JSC (higher-quality ore via underground mining) and Timan Bauxites JSC (open-pit mining with larger reserves but lower ore quality).	1. Moderate logistical constraints and relatively low transportation costs 2. Lower dependence on imported raw materials	1. Significant organizational and financial challenges 2. Higher costs associated with underground mining compared to importing higher-quality bauxite 3. Limited capacity to address the bauxite deficit 4. Raw material quality is lower
Development or restoration of existing facilities within Russia	This approach involves resuming operations at already existing mines (e.g., SOBR) or exploring new deposits for future development opportunities	1. Moderate logistical constraints and relatively low transportation costs 2. Lower dependence on imported raw materials	1. Significant organizational and financial challenges 2. Absence of deposits with high-quality raw materials 3. Limited capacity to address the bauxite deficit

, the most promising ones are purchasing bauxite from various suppliers and establishing new production capacities in countries with stable geopolitical environments and moderate transportation costs.

The potential for increasing bauxite production at the company’s Russian assets is constrained by complex mining and geological conditions, reliance on underground mining methods, and high current utilization rates of existing capacities—such as Timan Bauxites, which was operating at 112% capacity utilization [87,88].

Expanding bauxite output at overseas assets is feasible, given that these facilities are underutilized, but there are a number of objective reasons that make this difficult [89].

Nepheline, kaolin, and other raw materials are also considered viable alternatives. The company currently mines nepheline at the Kiya-Shaltyrskoe nepheline deposit, with raw material transported to the Achinsk alumina refinery. Nonetheless, significant increases in production are limited by reserves—estimated to last less than ten years—and challenging mining and geological conditions. Large reserves of nepheline (urtite) are located in the Republic of Tyva; however, extraction is currently unfeasible due to inadequate logistical infrastructure in the region [95,96].

Among the various options considered for diversifying alumina sources, three strategies have been identified for further detailed analysis and economic evaluation. These options aim to provide quick solutions to alumina shortages stemming, addressing both short-term and long-term need.

During the study, SWOT and PESTLE analyses were carried out and are summarized in

Table 6. PESTLE analysis.

PGLZ Capacity Expansion Project	LGZ Construction Project
Political (P)
(1) No risk of sanctions due to the exclusive use of domestic raw materials. (2) Political stability within the country ensures uninterrupted mining and processing of raw materials.	(1) Government support for the project, including the construction of transport infrastructure. (2) Relative political stability in Sierra Leone, where bauxite ores are mined. (3) Risk of sanctions affecting the maritime supply of raw materials.
Economical (E)
(1) Production costs are higher compared with traditional raw material sources. (2) Raw materials are sourced both internally (own quarries) and externally (nepheline purchased from PhosAgro; limestone from own quarry).	(1) The Bayer process is widely recognized as the industry standard and is cost-efficient. (2) Utilizing raw materials from internal sources reduces production costs.
Social (S)
(1) Enhances corporate image through the efficient utilization of production waste (nepheline). (2) Shortage of skilled professionals in the region.	(1) Enhances corporate image by creating employment (approximately 7000 jobs) and developing social infrastructure. (2) Possible opposition from local communities due to environmental impacts. (3) Shortage of skilled professionals in the region.
Technological (T)
(1) Complex processing technology increases project implementation challenges. (2) Requirement for specialized, non-standard equipment complicates the project. (3) High demand for thermal energy and raw materials for sintering (limestone) reduces economic efficiency. (4) Complex processing yields alumina and other valuable by-products, positively impacting the environment.	(1) Technology is industry-standard (Bayer process), simplifying production line setup. (2) Construction requires imported Chinese equipment, increasing logistics costs. (3) High-efficiency technology allows for low production costs. (4) Red mud by-product poses environmental challenges.
Legal (L)
(1) Legislative trends indicate tightening standards for environmental emissions. (2) Simplified permitting process due to project being based on an existing facility.	(1) Legislative trends indicate tightening standards for environmental emissions. (2) Complex permitting and approvals required for constructing a new facility.
Environmental (E)
(1) Abundant nepheline resources on the Kola Peninsula. (2) Reduced environmental impact on the Kola Peninsula through more efficient nepheline use. (3) Emission control necessary due to high limestone consumption for sintering.	(1) High industry competition for bauxite deposits complicates raw material supply. (2) Red mud generation from the Bayer process increases regional environmental impact.

and

Table 7. SWOT analysis.

PGLZ Capacity Expansion Project	LGZ Construction Project
Strengths (S)
(1) Availability of established technologies and in-house expertise for nepheline processing. (2) Additional raw materials for processing (limestone) are sourced from the company’s own quarry. (3) Reduced logistics costs compared with traditional supply chains. (4) Environmental benefits from integrated processing, producing multiple by-products.	(1) Full self-sufficiency in alumina production, including reserves for future expansion. (2) Utilization of raw materials (bauxite) from the company’s own operations in Sierra Leone. (3) High-quality bauxite and economically efficient production processes.
Weaknesses (W)
(1) Requirement to expand a complex process chain. (2) Raw materials (nepheline) are partially sourced from third-party suppliers. (3) High limestone consumption (approximately 7 Mg of limestone per Mg of alumina). (4) Lower economic efficiency of the process (excluding logistics) compared with traditional raw material sources.	(1) High logistics costs due to long-distance bauxite transportation from Guinea to Ust-Luga. (2) Significant capital investment requirements. (3) Remote location relative to aluminum production facilities. (4) Red mud by-product from processing presents environmental challenges.
Opportunities (O)
(1) Large ore reserves. (2) Enhanced import independence and resilience to sanctions. (3) Improved regional environmental conditions due to reduced nepheline waste in dumps [97,98].	(1) Potential increase in aluminum profitability through lower alumina costs (production costs below market prices: USD 257 vs. USD 503). (2) Reduced reliance on imported alumina supplies. (3) Growing market demand for alumina.
Threats (T)
(1) Challenges in procuring specialized processing equipment. (2) Volatility of aluminum prices. (3) Increasing government regulation on environmental and ecological standards [99,100].	(1) Continued partial dependence on imported raw materials, as bauxite is sourced internationally [101]. (2) Volatility of aluminum prices. (3) Stricter government oversight on environmental impacts. (4) Potential sanction risks, including bans on maritime transportation of bauxite.

.

Conducting a PESTLE analysis enabled the identification of external factors influencing the projects, while the subsequent SWOT analysis highlighted their internal strengths and weaknesses. The primary distinction between the two projects lies in their raw material dependence: the PGLZ expansion project is fully independent of imports, whereas the LGZ construction project relies on raw materials sourced from the company’s international operations. Consequently, the PGLZ project demonstrates greater resilience to external fluctuations and is subject to fewer risk factors. Both projects, however, face a shared challenge in the procurement of imported equipment. Overall, the analyses confirm that both project options are suitable for economic evaluation and strategic planning.

The options associated with these two projects include (Table 8):

• Expansion of existing capacities at PGLZ to achieve alumina production growth by 30%;
• Construction of a new alumina refinery (LGZ) in Russia with associated mining facilities in Sierra Leone to meet rising bauxite demand;
• Construction of a new alumina refinery (LGZ) with procurement of bauxite from third-party suppliers at market prices.

Table 8. Three resource diversification strategies: A comparative assessment [compiled by authors].

	Option	Investment, USD mln.	Period	Production Capacity, Thousand Mg of Alumina per Year	Capacity Growth Rate, %	Feasibility	Economic Efficiency
A	Increasing PGLZ capacity by 30% (90 thousand Mg)	23.5	2	90	3.5	0.001	0.60
B	Establishing a bauxite mining facility in Sierra Leone and constructing the LGZ refinery	4105	8	4800	187	0.191	0.21
C	Constructing the LGZ refinery utilizing existing bauxite sources and purchasing the shortfall from third-party suppliers	4000	8	4800	187	0.186	0.14

Table 8. Three resource diversification strategies: A comparative assessment [compiled by authors].

	Option	Investment, USD mln.	Period	Production Capacity, Thousand Mg of Alumina per Year	Capacity Growth Rate, %	Feasibility	Economic Efficiency
A	Increasing PGLZ capacity by 30% (90 thousand Mg)	23.5	2	90	3.5	0.001	0.60
B	Establishing a bauxite mining facility in Sierra Leone and constructing the LGZ refinery	4105	8	4800	187	0.191	0.21
C	Constructing the LGZ refinery utilizing existing bauxite sources and purchasing the shortfall from third-party suppliers	4000	8	4800	187	0.186	0.14

The first option—expansion of PGLZ capacity—involves increasing alumina output by 30%. An alternative raw material—nepheline concentrate—can be sourced from PhosAgro’s operations. This strategy enables a production increase within two years and reduces the alumina deficit by approximately 3.5%. Its primary advantages include utilizing domestically available raw materials obtained through an alternative production process and requiring relatively modest investments.

The second and the third options envisage establishing a new alumina refinery in Ust-Luga (the Gulf of Finland, Russia). The second option involves creating overseas ore mining capacities (3 million Mg of ore) to supply bauxite directly to the refinery, aiming to lower costs and enhance supply stability. The third option entails purchasing bauxite from international mining companies at market prices to meet raw material needs. The proposed large-scale refinery would have an annual capacity of approximately 4.8 million Mg of alumina, capable not only of covering current raw material deficits but also supporting future increases in aluminum production. The project’s implementation spans eight years across two stages, with an estimated capacity surplus covering about 187% of the current deficit. The total investment required is substantial—approximately USD 4 billion—though precise figures are yet to be finalized. A key drawback is ongoing dependence on imported bauxite, which introduces risks related to potential supply disruptions.

To compare these three options, three key indicators are proposed (Formulas (1)–(4)):

$$\mathrm{C}\mathrm{a}\mathrm{p}\mathrm{a}\mathrm{c}\mathrm{i}\mathrm{t}\mathrm{y} \mathrm{G}\mathrm{r}\mathrm{o}\mathrm{w}\mathrm{t}\mathrm{h} \mathrm{R}\mathrm{a}\mathrm{t}\mathrm{e}={\displaystyle \frac{\mathrm{A}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{i}\mathrm{n}\mathrm{a} \mathrm{p}\mathrm{r}\mathrm{o}\mathrm{d}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n} \mathrm{v}\mathrm{o}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{e} \mathrm{i}\mathrm{n} 2023}{\mathrm{D}\mathrm{e}\mathrm{f}\mathrm{i}\mathrm{c}\mathrm{i}\mathrm{t} \mathrm{v}\mathrm{o}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{e} \mathrm{i}\mathrm{n} 2023}}$$

(1)

This metric assesses how significantly each diversification option can address the alumina deficit relative to shortfalls in 2023.

$$\mathrm{D}\mathrm{e}\mathrm{f}\mathrm{i}\mathrm{c}\mathrm{i}\mathrm{t} \mathrm{v}\mathrm{o}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{e} \mathrm{i}\mathrm{n} 2023=\mathrm{A}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{i}\mathrm{n}\mathrm{u}\mathrm{m} \mathrm{p}\mathrm{r}\mathrm{o}\mathrm{d}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n} \mathrm{v}\mathrm{o}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{e} \mathrm{i}\mathrm{n} 2023\times 2-\mathrm{A}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{i}\mathrm{n}\mathrm{a} \mathrm{p}\mathrm{r}\mathrm{o}\mathrm{d}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n} \mathrm{v}\mathrm{o}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{e} \mathrm{i}\mathrm{n} 2023,$$

(2)

where 2 is the consumption rate for producing one Mg of alumina

$$\mathrm{F}\mathrm{e}\mathrm{a}\mathrm{s}\mathrm{i}\mathrm{b}\mathrm{i}\mathrm{l}\mathrm{i}\mathrm{t}\mathrm{y}={\displaystyle \frac{\mathrm{P}\mathrm{r}\mathrm{o}\mathrm{j}\mathrm{e}\mathrm{c}\mathrm{t} \mathrm{i}\mathrm{n}\mathrm{v}\mathrm{e}\mathrm{s}\mathrm{t}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{s}}{\mathrm{C}\mathrm{o}\mathrm{m}\mathrm{p}\mathrm{a}\mathrm{n}\mathrm{y} \mathrm{a}\mathrm{s}\mathrm{s}\mathrm{e}\mathrm{t}\mathrm{s}}}$$

(3)

This ratio reflects the financial viability by comparing project investments against total company assets.

$$\mathrm{E}\mathrm{c}\mathrm{o}\mathrm{n}\mathrm{o}\mathrm{m}\mathrm{i}\mathrm{c} \mathrm{E}\mathrm{f}\mathrm{f}\mathrm{i}\mathrm{c}\mathrm{i}\mathrm{e}\mathrm{n}\mathrm{c}\mathrm{y}={\displaystyle \frac{\left(\mathrm{M}\mathrm{a}\mathrm{r}\mathrm{k}\mathrm{e}\mathrm{t} \mathrm{p}\mathrm{r}\mathrm{i}\mathrm{c}\mathrm{e} \mathrm{o}\mathrm{f} \mathrm{a}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{i}\mathrm{n}\mathrm{a}-\mathrm{C}\mathrm{o}\mathrm{s}\mathrm{t} \mathrm{o}\mathrm{f} \mathrm{a}\mathrm{l}\mathrm{u}\mathrm{m}\mathrm{i}\mathrm{n}\mathrm{a} \mathrm{p}\mathrm{r}\mathrm{o}\mathrm{d}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}\right)\times \mathrm{A}\mathrm{n}\mathrm{n}\mathrm{u}\mathrm{a}\mathrm{l} \mathrm{p}\mathrm{r}\mathrm{o}\mathrm{d}\mathrm{u}\mathrm{c}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}}{\mathrm{P}\mathrm{r}\mathrm{o}\mathrm{j}\mathrm{e}\mathrm{c}\mathrm{t} \mathrm{i}\mathrm{n}\mathrm{v}\mathrm{e}\mathrm{s}\mathrm{t}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{s}}}$$

(4)

This ratio measures the return on investment by comparing economic gains—derived from global market prices minus production costs—to capital expenditure. The costs of producing alumina from nepheline, the company’s bauxite ores, and purchased bauxite were calculated for options a, b, and c, respectively. The cost calculations incorporate raw material consumption rates based on BAT standards [75], with market-based pricing applied.

When comparing these options across three key indicators, several insights emerge:

• The capacity expansion is minimal for Option A, whereas Options B and C not only fully address the current deficit but also generate a substantial surplus, supporting future growth in aluminum production.
• From an implementation perspective, Option A is the simplest for the company to execute; Options B and C demand significant capital investments.
• Economically, Option A demonstrates the highest efficiency; additionally, if the company proceeds with constructing the LGZ refinery, it should aim to increase its own production capacity.

Notably, Options B and C enable the company to eliminate dependence on imported alumina raw materials. While Options B and C rely on bauxite imports, Option A allows for entirely domestic raw material utilization within the production chain. The calculations did not account for logistics costs associated with transporting bauxite/nepheline to the facility or alumina to aluminum refineries. However, in Option A, raw materials are transported over a shorter distance (approximately 1000 km by rail), which could reduce logistical expenses. Increasing PGLZ’s capacity offers an efficient short-term solution to partially replenish alumina deficits. In the long term, constructing a dedicated alumina refinery using domestically mined raw materials is advisable.

The primary economic benefit of increasing PGLZ’s capacity by 30% stems from cost savings achieved by producing alumina from nepheline at the plant itself versus purchasing from third-party suppliers.

For constructing the LGZ refinery, similar calculations were performed considering technological differences. During the first phase of LGZ’s operation, it will have a capacity of 2.4 million Mg annually; during the second phase, total capacity will reach 4.8 million Mg per year.

The data used to calculate the production cost of one Mg of alumina, following an increase in the capacity of PGLZ by 90,000 Mg per year, are presented in

Table 9. Costs of producing alumina from nepheline concentrate at PGLZ [compiled by the authors].

Costs	Consumption Rate per Mg of Alumina	Cost per Unit, RUB	Annual Costs, RUB	Cost per Mg of Alumina, RUB/t
Payroll (85 workers)	-	85,000	86,700,000	963.33
Insurance premiums (30.2%)	-	-	26,010,000	289
Nepheline	4.5 t	1228.23	497,433,150	5527
Limestone	7 t	500	315,000,000	3500
Electricity	1050 kWh	8	756,000,000	8400
Coal	1375 t	1200	1,485,000,000	1650
Commercial expenses	-	-	91,482,158	1016.47
Other expenses	-	-	182,964,315	2032.94
Depreciation			94,000,000	1044.44
Total			2,198,089,623	24,423.22

. Similarly,

Table 10. Costs of producing alumina from bauxite at LGZ [compiled by the authors].

Costs	Consumption Rate per Mg of Alumina	Cost per Unit, RUB	Annual Costs, RUB	Cost per Mg of Alumina, RUB/t
Payroll (85 workers)	-	85,000	7,650,000,000	1593.55
Insurance premiums	-	-	2,295,000,000	478.13
Bauxite	2.64 t	3045	38,586,240,000	8038.8
Limestone	0.0295 t	500	70,800,000	14.75
Na2CO3	0.135	22,675	14,693,400,000	3061.13
Electricity	0.375 kWh	8	14,400,000,000	3000
Coal	0.2455 t	1200	1,414,080,000	294.6
Commercial expenses	-	-	3,955,476,000	824.06
Other expenses	-	-	7,910,952,000	1648.12
Depreciation			16,365,400,000	3409.46
Total			107,341,348,000	22,362.78

provides the corresponding data for estimating the production costs at LGZ.

Several assumptions underpinned these calculations:

• Average consumption rates of raw materials and resources typical for the industry were employed;
• Logistics costs were not included in the analysis; accounting for them would render the option of expanding PGLZ’s capacity more economically advantageous;
• The economic benefit was determined as the difference between the market price of alumina and its production cost;
• Commercial expenses were estimated at 10% of total costs, while other expenses were assumed to constitute 20%.

The calculation of alumina production costs is based on process flow diagrams [75]. At PGLS, the cost per Mg of alumina is estimated at RUB 24,423.22, equivalent to USD 280, while at LGZ, the cost is RUB 22,362.78, or USD 257.

To assess economic efficiency, additional profit margins were calculated by considering global alumina prices and the production costs associated with each project. The global price for alumina was approximated using the average price reported in UC Rusal’s annual report for 2024, which stood at USD 504 at the time of calculation. Consequently, the profit per Mg of alumina produced amounts to USD 222.27 for PGLS and USD 245.04 for LGZ. The key indicators of economic efficiency for both projects are summarized in

Table 11. Economic efficiency indicators [compiled by the authors].

Indicator	PGLZ	LGZ
Investments, RUB mln.	2350	400,000
NPV, RUB mln.	5021	15,861
IRR, %	58	21
PI	3.33	1.06
Payback period, years	3.78	18.16

.

Based on these results, it can be concluded that both projects demonstrate substantial economic viability and are feasible for implementation. It is noteworthy that expanding PGLZ’s capacity is projected to require approximately two years, making this option a promising short-term solution to address raw material shortages. In contrast, the construction of LGZ is expected to span eight years, with the first phase of the project taking three years. This longer timeline aligns with the company’s strategic long-term objectives and offers a comprehensive solution to ensure a stable raw material supply in the future.

During the study, a sensitivity analysis of the proposed projects was conducted (Figure 4 and Figure 5). The analysis examined changes in Net Present Value (NPV) in response to fluctuations in alumina prices, capital expenditures, and operating costs. Both projects proved most sensitive to variations in alumina prices. Notably, the PGLZ capacity expansion project consistently maintained a positive NPV and demonstrated greater resilience to changes in capital costs. In contrast, the LGZ construction project becomes unprofitable if any of the key parameters deviate by 10% or more. It is also important to consider that increases in operating costs are often accompanied by corresponding rises in global alumina prices, partially offsetting cost growth.

Consequently, it can be concluded that investments in the PGLZ expansion project entail comparatively lower risk.

4. Discussion

Based on the research findings, it is evident that global corporate experience in the mining industry offers a range of strategies aimed at improving resource provision. These strategies focus on raw materials usage or recycling.

Recycling is recognized as a highly promising and effective approach. Aluminum recycling constitutes a significant and growing share of global practice, with notable activity in countries such as Brazil, the UAE, and others. However, it involves a complex production chain to ensure product quality, which limits its applicability.

For UC Rusal, recycling is not a viable short-term solution due to the company’s specific circumstances. Expanding the share of production derived from recycling may be a promising medium- to long-term strategy.

Traditional sources of aluminum raw materials are practically not available in Russia, and imports are associated with increased geopolitical and economic risks and reduced economic security. The results of this study show that improving the stability of the supply chain is currently the most important task for both UC Rusal and the aluminum industry as a whole.

These findings are consistent with other scientific papers on supply chain risks and resource availability. For example, the article “Risks in Critical Metals Supply Chains: Sources, Distribution, and Responses” highlights the vulnerabilities of metallurgical supply chains and the need to increase their resilience [102].

In the article “Risk Assessment and Forecasting of Essential Mineral Resource Supplies to China: The Case of Copper” (Cheng Jinhua, Shuai Jing, Zhao Yujia et al.), the authors analyze the risks associated with copper supplies to China using the new EMRC (Environment–Market–Resource–Competitiveness) evaluation framework [103]. The four dimensions of risk are:

• Environmental—geopolitical stability and environmental risks of supplier countries;
• Market—supply concentration and import dependency;
• Resource—reserve sufficiency and the reserves-to-production ratio;
• Competitiveness—China’s comparative and trade advantage in the copper industry.

This approach can be applied to the aluminum sector as well.

Addressing resource security through the use of alternative raw materials represents a unique solution with no direct analogs in the global aluminum industry. Given the company’s existing technological capabilities and domestic raw material availability, this approach is particularly suitable for UC Rusal.

The results of this study indicate that enhancing supply chain stability is currently the most critical task for both UC Rusal and the broader aluminum industry. This includes reducing import dependence and incorporating domestic alternative raw materials into production processes.

For the priority strategies presented in the study for UC RUSAL, the authors determined economic efficiency and analyzed sensitivity to changes in key indicators (change in NPV due to variations in: alumina price, operating costs, capital costs). Other researchers have not carried out similar calculations in modern conditions.

Research limitations:

1. Risk analysis for all identified directions of raw material diversification was conducted primarily through qualitative methods using expert judgment. Quantitative risk assessment was performed only for priority diversification strategies, based on sensitivity analysis.

2. When selecting strategic directions of raw material diversification, the authors did not fully consider environmental and social factors within the ESG agenda. On the one hand, all project decisions embedded in the strategies comply with modern environmental standards and are based on the best available technologies (innovations). On the other hand, alumina production exerts a significant impact on the natural environment. For example, the new alumina plant construction project is expected to utilize dozens of hectares of land with relatively low soil quality.

3. In our study, the limitations of the source data are determined by the structure of the Russian aluminum industry, as the company RUSAL effectively integrates all enterprises within the technological chain. Consequently, the company operates under unique geopolitical conditions that disrupt global value chains, thereby necessitating the substantiation of domestic resource directions for securing production activities.

5. Conclusions

The conducted research in accordance with the research questions allows the authors to formulate the following conclusions.

1. Globally, aluminum companies are not fully self-sufficient in mineral resources, and their raw material supply strategies differ. Some companies (e.g., ALCOA) possess sufficient raw material reserves, Chinese producers prioritize secondary recycling, while Brazilian producers focus on the utilization of by-products from aluminum production itself.

2. The Russian aluminum industry has relied on imported mineral raw materials for decades, achieving substantial success during this period. However, under current geopolitical conditions, RUSAL’s participation in global value chains has been effectively excluded. The authors demonstrate the necessity of transforming the company’s global strategy into a national one, focused on maximizing reliance on diversified domestic raw material sources.

3. The use of traditional raw materials for aluminum production (bauxite) in Russia in sufficient quantities is impossible due to complex mining and geological conditions, high production costs, and the need to develop new underground mines, among other factors.

4. The use of secondary raw materials by RUSAL does not solve the fundamental problem of alumina supply, owing to the substantial shortage of mineral raw materials required for its production.

5. Russia, however, possesses large reserves of alternative raw materials (nepheline), and technologies for producing alumina from nepheline are being continuously improved. This provides unique solutions with no direct analogs in the global aluminum industry. Consequently, the most viable diversification strategies for Russia may differ significantly from international practices.

6. To identify potential resource diversification pathways, RUSAL developed a methodological framework that includes an evaluation of strategies across several criteria. Each diversification pathway was illustrated with practical examples from UC RUSAL’s operations, indicating key advantages and disadvantages.

7. To determine optimal resource alternatives, a methodological approach based on three indicators was developed: feasibility, economic efficiency, and capacity growth. Applying this framework, two alternatives were selected:

• In the short term, expansion of nepheline concentrate processing capacity at the Pikalevo Alumina Refinery;
• In the long term, the construction of a new Leningrad Alumina Refinery.

These strategies take into account Russia’s raw material base, existing production capacities, supply chains, and geopolitical and other risks, which were substantiated through the application of SWOT and PESTLE analysis methods.

8. Further research development will include the justification of approaches to geopolitical risk assessment in resource security strategies, as well as a more detailed evaluation of ESG factor impacts on the selection of mineral raw material sources.