INCREASING DEPENDENCE OF THE SOVIET ALUMINUM INDUSTRY ON FOREIGN RAW MATERIALS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700020069-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: March 2, 2010
• Sequence Number: 69
• Publication Date: November 1, 1971
• Content Type: IM

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~J d' .
t~~ /v r~ ~ M 7I -a/( Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Increasing Dependence of the Soviet Aluminum Industry
on Foreign Raw Materials
Secret
ER IM 71-216
November 1971
Cop; No. 5f
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 aad 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP i
Lrtdud,d from aulomolk
downgrodfnp and
docloscif'icolior
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
November 1971
INCREASING DEPENDENCE OF TJ.E SOVIET ALUMINUM INDUSTRY
ON FOREIGN RAW MATERIALS
Introduction
1. During the past ten years there has been a strong and sustained
effort in the USSR to create a large aluminum industry. Ambitious goals
for the output of aluminum were set during the Seven-Year Flan period
(1959-65) and during the Eighth Five-Year Plan period (1966-70). Despite
shortfalls from those planned goals, the Soviet aluminum industry,
nevertheless, achieved impressive increases in output of aluminum ingot and
has become one of the world's leading producers and exporters of this metal.
W 1. More recently it has become apparent that the drive to expand
outp'it very rapidly has outstripped the capacity of domestic raw materials
pro%ucers. Hence, the USSR has been forced to accelerate imports of
bauxite and alumina from foreign suppliers. The United States, in particular,
has suddenly become a major supplier of alumina to the USSR.
3. This memorandum assesses the implications of the Soviet drive
to expand its purchases of raw materials from non-Soviet suppliers and
reviews some of the key problems affecting the past and future development
of the aluminum industry.
Background
4: The USSR is the second largest producer of aluminum in the
world. Output in 1970 amounted to an estimated 1.7 million metric tons(l)
1. All tonnages are metric.
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within CIA.
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(see Table 1), about 48% of the level of US output and about one-fifth
of world production. During the decade 1961-70, output nearly tripled,
and the growth rate of aluminum exceeded that of any other major
non-ferrous metal.
USSR: Production of Primary Aluminum a/
Production
(Thousand
index
Percent
Year
Metric Tons)
(1960 =
100)
Increase
1960
630
100
--
1961
700
111
11
1962
770
122
10
1963
855
136
11
1964
945
150
11
1965
1,000
159
6
1966
1,160
184
16
1967
1,295
206
12
1968
1,475
234
14
1969
1,595
253
8
1970
1 , 720
273
8
a. Output of secondary aluminum (scrap recovery)
is not included in this table.
5. The rapid growth in aluminum output is 'lie result of policy
decisions made morc than a decade age. Those decisions were reflected
in the very high output targets set for the Seven-Year Plan (1959-65), and
for the Eighth Five-Year Plan (1966-70). Output was planned to triple
during the Seven-Year Plan and more than double during the Eighth
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Five-Year Plan. Actual output, however, fell short of planned goals in both
periods by a substantial margin: in 1965 an estimated 1 million tons of
aluminum were produced against the 1.5 million tons planned; in 1970,
actual output reached about 1.7 million tons, compared with a planned
goal of 2 million tons.
6. During the current Five-Year Plan period, output is planned to
grow at the rate of 8%-10% a year, somewhat below rates achie'%ed during
the 1960s, but still rapid. If planned goals are realized, the TJSSR will raise
annual production by about I million tons of aluminum during 1971-75
and reach a level of output of 2.8 million tons by 1975. In 1975, output
of aluminum in the USSR could exceed more than one-half of the US
level.
Big Push in Siberia
7. The steady growth in aluminum producticn in recent years is the
result of an extensive program of modernization and expansion of plant
capacity. Since about 1964, new aluminum reduction facilities (smelters)
have been built, or are under construct.:on, at Irkutsk, Krasnoyarsk, and
Bratsk in Eastern Siberia, at Novokuznetsk (North) in Western Siberia, and
at Volgograd in the Western USSR (see the map). The plants in Eastern
Siberia are very large; when full capacity is reached, these facilities will
provide 1.5 million tons of aluminum ingot a year, an amount nearly equal
to the output of a' Soviet producers in 1970 (see Table 2). Eastern Siberia
has emerged as the major center of aluminum production in the USSR.
8. The smelters in Eastern Siberia are far removed from the major
centers of aluminum consumption in the Western USSR. Moreover, at the
present time it is necessary to supply these smelters with most of their
raw materials (alumina)(2) from plants in the Urals about 2,900 kilometers
distant.(3) Freight charges associated with these increased transportation
requirements add an estimated 40-50 rubles to th,. cost of each ton of
aluminum produced in Eastern Siberia, compared with the cost of producing
aluminum in the Urals region or in the Western USSR. Nevertheless, these
costs are acceptable because of the significant savings in operating costs
that are realized in Eastern Siberia by the use of very cheap hydroelectric
power (aluminum s,nclters consume enonnous quantities of electric power).
For example, the cost of ;lectric rower per ton of aluminum in Eastern
Siberia is about 35 rubleF, compared with aboui '70 rubles in the Western
2. Alumina (aluminum oxide) is an intermediate product derived from
bauxite and other aluminous ores. Alumina L processed into aluminum at
reduction plants.
3. At Kamensk-Uralskiy and Kra$noturinsk.
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Soviet Aluminum Production Facilities
cn
n
t21
H
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USSR: Actual and Planed Capacity
of Soviet Aluminum Reduction Plants
1970
Planned
Capacity Additions
(Thousand (Thousand
Plant Metric Tons) Metric Tons)
Western USSR
Kame;.sk-Urals
kiy 100
--
Kanaker
Kandalaksha
35
75
--
Krssnoturi.nsk
100
Nadvoitsy
60
--
Sumgait
60
--
.Volgograd
280
--
Volkhov
20
--
Zaporozh'ye
100
--
Western Siberia
Novokuznetsk (North) 160
--
Novokuznetsk (South) 8C
--
Eastern Siberia
Bratsk 300
420
Irkutsk 180
210
Krasnoyarsk 240
120
Central Asia
Regar Unknown Unknown
Total 1,790 750
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USSR and about 14.5 rubles in the Urals region.(4) Thus, it may be seen
that even with the increased transport charges, the unit cost of producing
aluminum in Easter Siberia is lower than in the Urals and compa_rus very
favorably with costs in the Western USSR.(5) Moreover, the cost savings
of the Eastern Siberian smelters will be enhanced over the next few years
as plants in the Urals begin to phase down as primary suppliers of alumina.
The USSR plans to supply most of the alumina needs of the new smelters
in Siberia from two large new alumina plants that have been under
construction in Pavlodar in the Kazakh SSR and Achinsk in Eastern
Siberia.(6) Construction of these facilities has been stretched out far beyond
completion dates, and production is currently far below design levels.
9. The decision of the Soviet government to locate aluminum
smelters in Eastern Siberia, although justified by the relatively low costs
of electric power, probably was not based exclusively on considerations
of the cost advantages. It seems likely that this decision reflects a longer
range Soviet economic strategy designed to develop the mineral and
industrial potential of Eastern Siberia.
Impetus to Growth
10. The Soviet aluminum industry is being developed mainly to
support the current and future needs of the Soviet defense and aerospace
industries. About 70% of all output is consumed internally and the lion's
share of this amount is believed to go to aerospace applications, both civil
and military. According to official Soviet sources, the aircraft industry is
the largest single consumer of aluminum mill products.(7)
11. Another major consumer of aluminum is the Soviet
electro-technical industry. Considerable progress has been made in the use
of aluminum, as a substitute for copper, in electro-technical products such
4. The cost of electric power per kilowatt-hour (kuw/hr) in kopecks for
these regions is: Eastern Siberia, 0.2; Western USSR, 0.4; Urals, 0.8. In
general, 18,000 kw/hr are consumed in the production of one ton of
aluminum.
5. Labor costs are higher in Siberia, but since these plants are highly
automated, the higher labor costs do not significantly alter these
comparisons.
6. A third plant has been constructed in Kirovabad (Azerbaydzhan SSR)
to supply alumina to plants in the Western USSR.
7. The Ministry of the Aviation Industry, not the Ministry of Nonferrous
Metals, appears to have control over the fabrication of aluminum mill
products. It is not known If this control extends to mill products
manufactured in special fabricating sections of aluminum smelters.
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as transformers and power transmission cables. About two-thirds of all
power cables produced in the USSR in 1970 used aluminum conductors,
and this proportion is scheduled to increase in the future. But other sectors
of the economy, such as the consumer goods and construction industries
which are major consumers of aluminum in the United States, have not
been important consumers in the USSR. In 1970 the domestic consumption
of aluminum in the USSR was only about one-third that of the United
States. With civilian applications lagging and domestic consumption below
potential levels, the USSR throughout the 1960s has had substantial
quantities of aluminum available for export, and the USSR has become
one of the world's leading exporters of aluminum.
Exports
12. Exports, however, are directed mainly to the Communist countries
of Eastern Europe - principally East Germany and Czechoslovakia. Of the
500,000 tons of aluminum ingot and rolled products exported in 1970,
about 75% went to the other Communist countries, principally Eastern
Europe. Exports of aluminum to these Communist countries have been
growing at rates of about 20% annually. In all, such exports increased from
about 60,000 tons in 1960 to 370,000 tons in 1970 (see table 3).
13. The USSR has not achieved any significant penetration in the
non-Communist aluminum market. The year 1970 was the peak year thus
far for Soviet sales of aluminum, most going to Japan and the United
Kingdom. Still, sales in the non-Communist market represented only about
1% of the supply available on that market.
14. The volurtie of Soviet exports to non-Communist countries has
been limited since 1963 by the so-called "Gentlemen's Agreement" which
is in effect between the Soviets and major aluminum producers in Japan
and Western Europe. Under this agreement, producers purchase a mutually
agreed upon quantity of aluminum from the USSR annually (more than
100,000 torts in 1970). In turn, the USSR agrees to market its aluminum
in Europe and Japan through the major producers. Direct Soviet sales of
primary aluminum ingot to smaller aluminum producers in Western Europe
and Japan that are not parties to the agreement are forbidden. The purpose
of the agreement is to prevent disruption of the aluminum market by Soviet
"dumping". Participating producers purchase aluminum from the USSR
usually at prices 10%-12% below prevailing prices.
Squeeze on Raw Materials
15. Traditionally, the USSR has enjoyed, and continues to enjoy, a
larger measure of self-sufficiency in raw materials bauxite and other ores)
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Exports of Aluminum Ingot
and Rolled Products
Metric Tons
Year.
Total
Communist
Countries
Non-Communist
Countries
Unidentified
1900-0
77,100
57,134
16,903
3,063
1961
99,500
79,455
16,503
3,542
1962
137,100
89,661
39,921
7,518
1963
147,800
96,573
38,933
12,294
1964
209,300
128,764
55,381
25,155
1965
271,100
161,961
70,494
38,645
1966
310,500
182,675
108,038
19,787
1967
313,500
208,832
86,673
17,995
1968
367,100
291,493
65,200
10,407
1969
422,800
322,529
90,700
9,571
19.70
499,900
370,685
86,968
42,247
a. By far, the Zargest part of unidentified-
nZ entifie s ipments
are exported to non-Communist countries.
for the aluminum industry than any other major world producer of
aluminum. Since the mid-1960s, however, domestic output of raw materials
and alumina has failed to keep pace with the rapid growth in aluminum
output. For example, in 1960 domestic raw materials provided for an
estimated 85% of aluminum production; by 1970 this share had fallen to
about 65%.() Thus it has become necessary to import substantial quantities
of raw materials.
8. It is estimated that the USSR produced about 1.2 million tons of
alumina from domestic ores in 1960 and about 2.2 million tons in 1970.
Approximately 2 tons of alumina are required to produce 1 ton of
aluminum.
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16. The output of raw materials has lagged behind the needs of the
aluminum industry for two major reasons: high-quality bauxite is in short
supply, and the production of alumina from non-bauxite ores is behind
schedule. The Soviets claim to have large reserves of bauxite, and have
recently intensified prospecting, but the alumina content of undeveloped
deposits is generally low (about 40%), and many of the deposits are not
favorably located for economic exploitation.(9) Further, most Soviet
bauxite ores contain large amounts of silicon and titanium which increase
the cost of processir. Long-established mines in the Urals are the principal
sources of high-quality bauxite, but reserves of these deposits appear to
be nearing exhaustion after almost 40 years of continuous exploitation.
The Soviets are now exploiting ores of much lower quality in the Urals.
Supplies of high-quality bauxite can be stretched out by blending with lower
quality ores. However, wide variations in the quality of the ores makes
it difficult to obtain a uniform blend required by the alumina plants for
efficient operations. Such difficulties have hampered operations at the large
alumina plant at Pavlodar which is estimated to be operating well below
its rated capacity (500,000 tons).
17. The USSR recognized some years ago that reserves of high-quality
bauxite probably would prove inadequate for the long-term n..eds of the
aluminum industry. Provision was made for extensive use of other aluminous
ores, such as nepheline syenite and alunite. Technology was developed and
successfully employed as early as 1948 for the production of alumina from
nepheline syenite at two small plants at Pikolevo and Volkhov in the Western
USSR. In 1956, plans were drawn up for construction at Achinsk (near
Krasnoyarsk) of a large alumina plant to exploit local nepheline syenite
ores (25% alumina content). Construction was not begun until 1964,
however, and by 1970 the plant was still only in partial operation. The
delays in completion of this facility are probably attributable, in part, to
the severe climatic conditions of the zone in which the plant is being built.
In addition, difficulties probably were experienced in developing techniques
for the large-scale, processing of nepheline ores. The scale of operations
envisioned at Achinsk (800,000 tons per year) has no counterpart elsewhere
in the world. Technical difficulties probably also explain the delay
encountered in reaching full production at the Kirovabad alumina plant.
This plant produces alumina from alunite, a non-bauxite ore with l%
alumina content. Although the plant was put into operation in 1965, it
has still not achieved the planned output of 250,000 tons of alumina per
year, according to recent statements of the Minister of the Ministry of
Nonferrous Metals.
9. High-grade bauxite is generally considered to have an alumina content
of about 50% or more.
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18. To ensure an adequate future supr!y of raw materials, the Soviets
have been experimenting for many year; witl- a process of direct
reduction - that is, the production of aluminum directly from aluminous
clay - primarily kyanite and kaolin - eliminating the intermediate alumina
production phase. Reportedly, this technology will reduce new investment
costs by about 20% and production costs by about 7%. A pilot plant, using
direct reduction techniques, is now in operation at %':aporozh'ye producing
about 50,000 tons of aluminum annually. Two additional direct reduction
plants may ultimately be built at Irkutsk, but information on planned dates
of completion and design capacity is not available.
19. Aluminum produced in the USSR from aluminous clay by direct
reduction contains a relatively high amount of silicon and titanium
impurities. Hence, applications of this aluminum are limited at present to
alloy castings of the kind used iargely in the automotive industry for the
manufacture of engine blocks and transmission housings. As the technology
of direct reduction is improved, the purity of the aluminum will also
improve, permitting a broader range of uses in the future. If
commercial-scale levels of output of high-quality aluminum by this process
can be achieved, the Soviet aluminum industry will ensure a high degree
of self-sufficiency in aluminum production and greatly enhance its
reputation as a world technological leader.
Growing Dependence on Foreign Suppliers
20. The growing Soviet dependence on foreign sources for aluminous
raw materials is evidenced by the fact that in 1970 about 35% of the total
output of aluminum was accounted for by imports of alumina and bauxite,
compared with about 14% in 1965. Prior to 1965, only Greece, which had
been shipping about 400,000 tons of bauxite yearly to the USSR, was an
important non-Soviet source of supply. Since 1965, imports of both bauxite
and alumina have increased dramatically. Yugoslavia joined Greece as a
major supplier of bauxite. Imports from Yugoslavia jumped almost six-fold
during 1966-70 and in 1970 accounted for more than 50%o of the 1.5 million
tons of bauxite imported by the USSR in that year. Small amounts of
bauxite were also obtained from Guinea.
21. Even more noteworthy has been the growth in trade in raw
materials with the United States. US exports of alumina to the USSR
mushroomed from slightly more than 50,000 tons in 1967, the first year
ever that the United States exported alumina to the USSR, to about 300,000
tons in 1970 - nearly a five-fold expansion in exports in a three-year period.
Such exports may reach about 500,000 tons in 1971. Hungary also has
become a major exporter of alumina to the USSR (about 200,000 tons
in 1970) as part of a long-term agreement for the exchange of Hungarian
- 10 -
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alumina for Soviet aluminum. Small amounts of alumina also has been
obtained from Greece, Guinea, Jamaica, Surinam, and France (see Tabl,-
4). Japan also shipped 125,000 tons of alumina to the USSR in the first
half of 1971.
Prospects
22. If the current Five-Year Plan zoals are met, output of aluminum
will increase by 50%a-60% and reach a level of 2.5 minion-2.8 ,.. :lion tons
by 1975. Most of the estimated additional increment of 800,00( 1,100,000
tons of aluminum will come from existing facilities. Completion of the
aluminum smelters in Eastern Siberia (Bratsk, Irkutsk, and Krasnoyarsk)
and operation of these plants at full capacity will yield an additional
750,000 tons of output. The remaining tonnages needed to meet the planned
goal could result from the completion of a new plant which is currently
under construction at Regar in the Tadzhik SSR and modernization of some
of the older plants.
23. The projected increase in aluminum production is certain to strain
the capacity of domestic raw material supplies. The USSR may be able
to increase alumina production by about l million tons by 1975, as the
plants at Achinsk, Pavlodar, and Kirovabad near full production. This
amount, however, falls far short of the additional 2 million tons of alumina
needed to sustain the increased aluminum output. Consequently, the USSR
will continue to require large additional imports of bauxite and a'_umina.
The Soviets have been shopping in various countries for long-term contracts
to ensure ample supplies of raw materials in future years. A recently
concluded 30-year trade agreement with Guinea provides for shipments of
about 2 million tons of bauxite annually to the USSR beginning in 1974.
Alumina shipments from Hungary are scheduled to increase in the future
and will reach 330,000 tons annually by 1980. Alumina shipments from
the United States are also likely to remain at substantial levels during the
next several years. The Soviets recently signed a contract with a large US
firm for 200,000 tons of alumina annually through 1975. The USSR is
also actively seeking to obtain long-term contracts for bauxite with Australia
and Indonesia. Barring any major turn-around in domestic raw material
production, it is estimated that imports of bauxite and alumina will account
for more than 50% of aluminum production in 1975.
24. The USSR will require about 5.5 million tons of alumina
equivalent to meet the 1975 target; about 2.7 million tons must come from
foreign suppliers. It is estimated that about two-thirds of these imports
(1.8 million tons) will be purchased from non-Communist countries.
However, it appears that current suppliers of alumina and bauxite may not
be able to wholly cover this amount. In that event, the USSR will be forced
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USSR: Imports of Bauxite and Alumina, by Country
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
Bauxite
Total
428.8
455.0
308.3
441.3
449.3
604.8
787.2
1,076.7
1,232.7
1,400.2
1,547.6
Greece
428.8
455.0
308.3
441.3
449.3
481.0
426.9
430.1
4.56.6
529.5
615.,0
Yugoslavia
?-
--
--
--
--
123.8
360.3
646.6
7,1.3
826.7
813.7
Guinea
-'
--
--
--
--
--
54.8
44.1
118?9
ToteZ
15.1
--
--
167.5
387.5
711.8
5.''7.6 a/
France
--
18.0
29.0
N.A.
Greece
21.^
28.1
38.2
N.A.
Guinea
--
--
5.0
--
Hungary
Jamaica
89.4
147.9
169.2
201.5
Sur. in;,m
--
--
116.0
N.A.
United States
Yugoslavia
Unidentified
53.2
193.5
354.4
291.4
a. Additional purchases of alumina were made but aro unreported.
Thousand Metric Tons
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to find new sources of supply in Australia, Indonesia., or possibly Guyana.
Since the recent nationalization of Alcan's holdings, Guyana has had
difficulty finding markets for I million-2 million tons of high-quality bauxite
and would be a ready source of additional supply for the Soviets.
25. The substantial transport costs involved in shipping alumina to
the East Siberian smelters from the Urals will remain an added cost to
the Soviet aluminum industry for the foreseeable future. The plants at
Ac'?iinsk and Pavlodar, even at full capacity, will produce only about 60%
of the projected raw material n-eds of the East Siberian plants by 1975,
Further delays in construction a-t Pavlodar and Achinsk could aggravate the
supply situation and necessitate even longer shipments of alumina from
plants in the Ukraine.
26. Soviet exports of aluminum will continue to increase in the next
five years and may reach 700,000-800,000 tons by 1975. Most of these
exports will continue to go to Eastern Europe, especially East Germany,
Czechosl,avakia, and Hungary. I`: does not appear likely that the USSR will
be able to achieve any significant penetration of non-Communist markets.
Recent information indicates that under the terms of the "Gentlemen's
Agreement," aluminum producers outside the Soviet orbit will increase their
purchases of aluminum from the USSR by an additional 10.000 tons
annually during the next five years. Moreover, the planned increases in
aluminum production throughout the world during 1971-75 are likely to
keep pace with demand and further reduce the likelihood of any significant
increases in Soviet sales.
27. The USSR has assigned a key role to alumimnm in the future
development of the econ,,mly and is promoting new domestic uses of the
metal. The projected high rate of growth in the engineering and construction
industries combined with a renewed emphasis on substitu.ion of light metals
for traditional heavy metals is likely to increase the demand for aluminum.
In his speech to the 24th Party Congress, for example, A.N. Kosygin referred
to the need to increase the use of modern light-weight aluminum
components in construction in place of traditional building materials. Some
evidence is available to indicate that the USSR is taking some of the
necessary steps to succeed in promoting new uses of this metal. For example,
specialized fabricating plants that produce aluminum structural components
are now under construction at Voronezh in the Ukrainian SSR and at
Khabarovsk in the Far East. The Voronezh plant is scheduled for completion
in 1973 ant will process 200,000 tons of aluminum annually
Kandalaksha, and Irkutsk plants are being enlarged to increase production
of a variety of aluminum wire and cable products.
the fabricating sections of the Bratsk, Sumgait,
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Conclusions
28. The USSR is the world's second largest producer of aluminum.
Output nearly tripled during the 1960s, and another large ncreasc in
production is scheduled for 1971-75, The region of Eastern Siberia has
become the major center of Muminum production and will remain so for
the foreseeable future.
29. The Siberian smelters are far removed from major centers of
aluminum consumption and sources of raw materials. Substantial transport
costs are incurred in shipping alumina to the smelters from the Urals and
returning aluminum ingot to the Western USSR. However, the added freight
costs are more than offset by the large cost savings achieved by using cheap
Siberian hydroelectric power. It is believed that the decision to locate
aluminum smelters in Eastern Siberia was not based on considerations of
profitability alone but is part of a broader long-range strategy to develop
the industrial potential of this region.
30. The rapid increase in aluminum production has outstripped the
production of raw materials by a wide margin, forcing the USSR to step
up imports of bauxite and alumina. Soviet dependence on foreign suppliers
of raw materials increased substantially during (he late 1960s, and this trend
is likely to continue, perhaps even to accelerate, during ti 2 next five years.
31. The large increase in production of aluminum scheduled for
1971-75 is intended primarily for the domestic economy. Efforts to promote
new uses of aluminum probably will meet with some success in view of
the progress being made in the construction of facilities designed to expand
and diversify the output of aluminum products. A further increase in exports
also seems likely, with most of these exports continuing to go to Communist
countries. Exports to nowCommunist countries probably will increase
modestly but will continue to account for only a small share of their supply.
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