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 company's 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, what's so special about aluminium billets? Let's 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.
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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 plant's casting centre to accommodate new state-of-the-art equipment, including a casting pit and furnaces. Doing so will see more of the company's 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 Tinto's 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 customer's growing demand for high quality alloys and value-added products made with renewable hydroelectricity.
