SYDNEY, Feb 12 (Reuters) - Rio Tinto has been struggling for years to recover from the $38 billion purchase that elevated it to the world's biggest aluminium company but also brought it to the verge of bankruptcy.
Now signs of price improvements for aluminium and related alumina and bauxite, amid slowing supplies out of China, are turning the division's fortunes around.
In Rio Tinto's financial results on Thursday, data showed aluminium had surpassed copper as the second biggest contributor to underlying earnings - $1.25 billion against $910 million for copper - in 2014 behind iron ore.
For perspective, in 2013, aluminium contributed $550 million versus $820 million by copper.
"Our aluminium division has grown into a significant contributor to group earnings and cash flow," Chief Executive Sam Walsh said.
Copper emerged as the metal facing the most bearish future in the latest Reuters poll of base metals analysts.
What was once the darling of metals' investors, copper is the only metal expected to average a lower price both this year and next year relative to 2014.
Aluminium was among the headline picks, with expectations among commodities analysts the metal will record a widening supply deficit over this year and next, supporting higher prices.
The aluminium price ended 2014 up 6 percent at $1,832 a tonne. That is still below Morgan Stanley's first quarter forecast of $2,050 a tonne.
Rio Tinto made its disastrous $38 billion acquisition of Alcan in 2007, a bruising top-of-the-market deal at twice the price Alcoa Inc was willing to pay.
The purchase turned bad as markets crumbled and aluminium prices slumped, battering Rio Tinto's balance sheet, nearly forcing it into the arms of Chinese state-owned Chinalco and triggering a $15 billion rights issue.
Rio subsequently suffered years of losses in aluminium, with Alcan adding to problems at its original business, and has taken some $29 billion in impairments.
Some 33 analysts in the Reuters poll expect aluminium to average $1,965 a tonne this year, 1.8 percent lower than in previous forecasts but still the smallest downward revision within the base metals complex this quarter.
Rio Tinto's 2014 net profit rose by 78 percent to $6.5 billion. (Editing by Ed Davies)