Rio Tinto's Canadian Operations Power Through Geopolitical and Market Headwinds

Rio Tinto's strategic bet on Canada is paying off handsomely. The mining giant's shares have surged approximately 50% since January, trading near 103.86 euros and brushing against a 52-week high. This impressive performance is underpinned by a dual advantage: leveraging stable Canadian hydropower to maximize aluminum output amid a global supply shock, while simultaneously executing a multi-billion dollar modernization of its North American industrial base.

A severe disruption to the global aluminum market has shifted the competitive landscape. Following Iran's effective closure of the Strait of Hormuz in late February, aluminum prices jumped to three-year highs. The region accounts for about nine percent of global production. The situation escalated from a logistics issue into a genuine supply shock, particularly after Emirates Global Aluminium was forced to idle a major smelter in Abu Dhabi due to rocket attacks, with repairs potentially taking up to a year. As ING commodity strategist Ewa Manthey notes, smelters are now struggling both to export metal and to import the alumina needed to produce it.

In this context, Rio Tinto’s Canadian assets have become a critical source of stability. The company operates five smelters, an alumina refinery, six power stations, and a dedicated port in Quebec's Saguenay region, which accounts for nearly half of its global aluminum output. The key differentiator is access to cheap, reliable hydropower. Recent heavy snowmelt has filled reservoirs, including the one supplying the Kitimat smelter in British Columbia, for the first time in years. This allows the company to restart idled pots and run at full capacity. "We are trying to play our role as a stable and reliable supplier to the American market — and we are giving it our all," Jérôme Pécresse, head of Rio's aluminum and lithium business, told the Globe and Mail.

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The company is backing this position with massive, long-term investment. A multi-billion dollar program in Canada includes $1.4 billion to expand a smelter with lower-emission AP60 technology and a further $1.7 billion to modernize a power station in Quebec, part of a total $5 billion commitment. This week, Rio Tinto also completed a C$135 million project at its BC Works smelter in Kitimat, replacing a 1960s-era conveyor system. The new enclosed system, designed to operate for decades, will move about 800,000 tonnes of alumina annually from the port to storage, cutting particulate emissions by 40% and bolstering the site's green credentials.

These investments proceed despite significant market friction. U.S. import tariffs of 50% on aluminum have been a persistent headwind, costing the company roughly $300 million in gross costs in the first half of 2025. While higher U.S. premiums initially softened the blow, the full tariff rate applied from the second quarter onward. Nevertheless, demand has remained resilient as costs are distributed throughout the supply chain.

The stock's recent rally has pushed its Relative Strength Index (RSI) to around 22, indicating a technically oversold condition and suggesting the upward momentum may have paused temporarily. Fundamentally, however, aluminum is moving to the core of Rio Tinto's strategy under CEO Simon Trott. The company is streamlining its portfolio, targeting up to $10 billion in asset sales to focus on four key commodities: iron ore, copper, aluminum, and lithium. The recent closure of the Diavik diamond mine last month marked another step in this strategic pivot.

Looking beyond aluminum, Rio Tinto is advancing its lithium ambitions in Quebec. The commissioning of the Bécancour processing facility is on schedule to begin in 2026, with first commercial production expected by 2028. For Rio Tinto, Canada represents not just a tactical advantage during a time of crisis, but the operational foundation for its next decades of growth.

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