Russian aluminium giant Rusal and U.S. manufacturer of aluminum alloys Braidy Industries plan to create a joint project to produce flat rolled aluminium products in the United States for the U.S. automotive industry, Rusal said.
Rusal, the world's largest aluminum producer outside China, is seeking expansion in one of the main markets for the sector less then three months after it was removed from a U.S. sanctions list. It has already resumed supplies to the U.S. market.
"The output from the mill will aid towards rebalancing the anticipated deficit of the auto body sheet in the U.S. market," Rusal said in a statement on Monday.
The binding documentation for the project — in which Rusal and Braidy Industries will get a 40% and a 60% stake, respectively — is expected to be signed in the second quarter, Rusal said. Both firms plan to approach financial markets for funding of the project.
The mill in Ashland, Kentucky will have an annual capacity of 500,000 tons of hot rolled band and 300,000 tons of finished cold rolled products.
Rusal plans to supply aluminum slab alloys and primary metal for the new mill from its new Taishet aluminum smelter that is currently under construction in Siberia. Rusal previously planned to launch the Taishet in late 2020.
Delivering value added products (VAP) to the Kentucky mill will also help Rusal's commitment to increase the share of VAP in its sales, the company added.
Its 2018 VAP sales were challenged by short extensions to the deadline for U.S. sanctions.
The United States imposed sanctions on the company and its co-owner Oleg Deripaska in April of 2018. Sanctions against Rusal and En+ were lifted in January as Deripaska reduced his stake in Rusal via its parent company En+ after months of talks and several extensions of the deadline for sanctions to take full effect.
Demand for flat rolled aluminum products in North America is expected to continue to grow with higher pace than in other parts of the world — especially in the automotive sector — due to fuel economy regulation which stimulates the use of aluminum-based components, Rusal said.
"The joint project with Braidy Industries is an excellent opportunity for Rusal to expand the Company's diverse expertise in one of the key areas of aluminium downstream products. It will also reinforce the Company's presence on the strategic market," it added.
Speaking to CNBC's Karen Tso Monday, Craig Bouchard, the CEO of Braidy Industries, explained that Rusal is the lowest carbon producer of high quality aluminum in the world.
"We need that aluminum in our furnaces such that we can produce the highest quality sheet aluminum in our industry. So they (Rusal) are the perfect partner," he said.