Rusal targets Ethiopia with $1 bln aluminium smelter | Hotter Commodities

Key takeaways:

• Rusal’s $1B aluminium smelter in Ethiopia: Russian aluminium giant Rusal partners with Ethiopia’s sovereign wealth fund to build a 500,000-tonne-per-year smelter, leveraging the country’s low-cost hydropower and growing industrial infrastructure
• Ethiopia’s rise in African aluminium production: The project positions Ethiopia as a potential leader in African aluminium production, with the smelter serving as a catalyst for industrialization and downstream opportunities
• Opportunities and challenges in emerging markets: While Ethiopia offers strategic advantages like renewable energy, the project faces risks including feedstock reliance, regulatory shifts and energy grid variability

With a projected timeline of three to four years and an expected operational life as long as 50 years, the first phase – valued around $1 billion – was expected to be 70% debt-financed, Ethiopian Investment Holdings (EIH) said on Friday November 14.

The project will combine substantial industrial potential with the operational and market complexities typical of large-scale ventures in emerging economies.

The Rusal smelter would place Ethiopia in a very small club of African aluminium producers, alongside South Africa, Mozambique and Egypt.

While Mozambique’s Mozal facility nominally has a slightly higher capacity, its future is uncertain. If electricity agreements are not renewed, the plant may close next year.

This could shift the regional aluminium balance, effectively making Ethiopia the largest African producer.

While the change in regional supply is notable, the fact that the plant would be operated by a Russian company may influence how it is integrated into existing trade flows and commercial relationships.

Ethiopia‘s growing infrastructure

Ethiopia offers Rusal, which produced almost 4 million tonnes of aluminium in 2024, a strategic combination of advantages.

Abundant, low-cost hydropower will provide the energy backbone for a large-scale aluminium smelter, while Ethiopia’s growing industrial infrastructure will support logistics and operational capacity.

Lower energy costs can enhance competitiveness and support low-carbon credentials in a market increasingly sensitive to sustainability premiums.

At the same time, the power grid is still developing and seasonal variability in water supply will mean that maintaining uninterrupted smelter operations will be a test of planning and execution.

EIH is stepping beyond its traditional role as a financier, intending to shape Ethiopia’s mineral and industrial sectors more actively.

Its recent acquisition of a 7.4% stake in Akobo Minerals AB – a Scandinavia-listed gold producer with Ethiopian operations – signaled a strategic push to acquire operational experience.

The Segele gold mine, set to scale-up production from a few kilograms per month to potentially 50-80kg per month, illustrates EIH’s broader ambition to professionalize a sector that has been long dominated by artisanal practices, and building operational experience in mining independent of the aluminium project.

The smelter itself could become a nucleus for downstream industrialization. Ethiopia currently lacks significant bauxite reserves, so initial feedstock imports will be required.

But the facility could stimulate local industries, develop technical skills and eventually foster exploration for alternative feedstocks, such as kaolin-derived alumina. And beyond aluminium, the project could position Ethiopia to explore or develop other strategic minerals, including its reserves of lithium, platinum and copper.

Energy integration remains central. Ethiopia’s hydropower, complemented by renewable projects, could provide a cost advantage that few competitors could match.

It might also anchor clusters of energy-intensive industries – aluminium, fertilizer, battery-material processing – creating an industrial corridor reminiscent of developments along Angola’s Atlantic coast.

Challenges in operations and supply chain

The project nonetheless carries tangible risks.

Aluminium smelting demands continuous energy, skilled labor and robust logistics. Reliance on imported feedstock, currency volatility and evolving regulatory frameworks add complexity.

While Ethiopia’s political and regulatory environment has strengthened, potential changes in policy or governance were still factors that could affect operations and supply chains.

Both partners appear to be aware of these issues, with joint oversight committees, feasibility studies and operational planning in place.

If it proceeds, the Rusal-EIH smelter will test how a major energy-intensive operation can be established in a new African industrial hub.

Its significance will reflect not just resource availability, but how effectively energy, logistics and operational capacity are coordinated – a practical test of whether new hubs of industrial influence can emerge on the continent.

In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Read more coverage on our dedicated Hotter Commodities page here.