Reuters
China is a deciding factor in 2013 Aluminium price: RUSAL
Edited by : AL CIRCLE
3 min read
Russia's RUSAL, the world's biggest aluminum producer, is prepared to cut output and costs this year to support prices, which could recover in 2013 if China also reduces production, a senior executive told Reuters.
"The market price is at a level where about 30 percent of producers are unprofitable. This means that people are forced to significantly reduce capital expenditures, which leads to stagnation of the industry," Oleg Mukhamedshin, RUSAL's head of equity and corporate development, said in an interview.
Aluminum prices ended last year near 18-month lows on concerns about weakening global demand for the metal, which is used in drink cans, car parts, planes and iPads, and prompted Alcoa (AA.N) and Norsk Hydro (NHY.OL) to cut capacity.
Since then aluminum prices have fallen another 5 percent and forced RUSAL to prepare to shut 250,000 to 300,000 metric tons of annual capacity this year to support global prices.
But RUSAL also expects China to support the global market.
On Monday aluminum prices plumbed their lowest level in nearly two years at $1,915.25 a metric ton before ending down $3 at $1,930.
The metal, which is in chronic oversupply, is under pressure from reports that China's top aluminum-producing province of Henan may subsidize electricity used by loss-making smelters in a bid to spur local growth.
Mukhamedshin criticized this policy, calling on China to cut unprofitable production. Global companies, excluding Chinese producers, have cut output by about 1.3 million metric tons of since December 2011.
The rest of the world has about 3 million metric tons of loss-making capacity, he said.
If producers take more responsibility, average aluminum prices can reach $2,500 to $2,600 per metric tons in 2013, up from an expected average this year of $2,200 a metric tons, he said.
RUSAL is cutting its own cash costs, which were at $1,950 per metric tons in the first quarter. The company has slightly delayed its Taishet project, which was expected to produce the first metal in 2013 and move to a full annual capacity of 750,000 metric tons eventually.
Decreasing aluminum prices have also helped RUSAL cut spending on power, which accounts for about a quarter of its costs, Mukhamedshin said. RUSAL's energy supply contracts are linked to aluminum prices on the London Metal Exchange.
A weak rouble and oil prices will also help the company in the second quarter, he said.
RUSAL owns the Friguia alumina refinery in Guinea, which has not been in production since April 3, despite the suspension of a strike at the plant.
"The market price is at a level where about 30 percent of producers are unprofitable. This means that people are forced to significantly reduce capital expenditures, which leads to stagnation of the industry," Oleg Mukhamedshin, RUSAL's head of equity and corporate development, said in an interview.
Aluminum prices ended last year near 18-month lows on concerns about weakening global demand for the metal, which is used in drink cans, car parts, planes and iPads, and prompted Alcoa (AA.N) and Norsk Hydro (NHY.OL) to cut capacity.
Since then aluminum prices have fallen another 5 percent and forced RUSAL to prepare to shut 250,000 to 300,000 metric tons of annual capacity this year to support global prices.
But RUSAL also expects China to support the global market.
On Monday aluminum prices plumbed their lowest level in nearly two years at $1,915.25 a metric ton before ending down $3 at $1,930.
The metal, which is in chronic oversupply, is under pressure from reports that China's top aluminum-producing province of Henan may subsidize electricity used by loss-making smelters in a bid to spur local growth.
Mukhamedshin criticized this policy, calling on China to cut unprofitable production. Global companies, excluding Chinese producers, have cut output by about 1.3 million metric tons of since December 2011.
The rest of the world has about 3 million metric tons of loss-making capacity, he said.
If producers take more responsibility, average aluminum prices can reach $2,500 to $2,600 per metric tons in 2013, up from an expected average this year of $2,200 a metric tons, he said.
RUSAL is cutting its own cash costs, which were at $1,950 per metric tons in the first quarter. The company has slightly delayed its Taishet project, which was expected to produce the first metal in 2013 and move to a full annual capacity of 750,000 metric tons eventually.
Decreasing aluminum prices have also helped RUSAL cut spending on power, which accounts for about a quarter of its costs, Mukhamedshin said. RUSAL's energy supply contracts are linked to aluminum prices on the London Metal Exchange.
A weak rouble and oil prices will also help the company in the second quarter, he said.
RUSAL owns the Friguia alumina refinery in Guinea, which has not been in production since April 3, despite the suspension of a strike at the plant.
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