Rio Tinto Limited (ASX: RIO) is about to increase its share in the fast-growing aluminium billet market, pouring US$188 million into expanding its Canadian production facility.
The companyâs Alma smelter, located in Quebec, will soon be able to put out an additional 202,000 tonnes of the low-carbon, high-value billets.
So, whatâs so special about aluminium billets? Letâs take a look at why Rio Tinto is increasing its production.
At the time of writing, the Rio Tinto share price is $96.47, 2.52% higher than its previous close. For context, the S&P/ASX 200 Index (ASX: XJO) is up 0.4% right now.
Own Rio Tinto shares? Here’s the latest from the company
Those invested in Rio Tinto shares may be thrilled to learn the company is moving to increase production of aluminium billets.
It plans to expand the Alma plantâs casting centre to accommodate new state-of-the-art equipment, including a casting pit and furnaces. Doing so will see more of the companyâs aluminium converted into higher-value billets.
Global demand for aluminium extrusion products is expected to grow an average of 3% each year for the coming decade. Such demand will likely be driven by decarbonisation initiatives and the energy transition.
Aluminium billets are generally used to make products like car bumpers and frames for doors and windows.
Rio Tintoâs aluminium segment brought in underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of around US$4.4 billion in 2021. That was more than double what it earned in 2020.
The key drivers for its growth were a rebound in sales prices and increased demand for value-added product.
Commenting on the latest news from the company, managing director of Rio Tinto Aluminium’s Atlantic operations Sébastien Ross said:
This expansion of our low carbon aluminium billet production capacity in Quebec will allow us to better meet our customerâs growing demand for high quality alloys and value-added products made with renewable hydroelectricity.
The post Own Rio Tinto shares? The companyâs leaning into demand for this high-value metal appeared first on The Motley Fool Australia.
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More reading
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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