Rio more exposed to aluminium

The weakening trend in aluminium, which lost nearly a fifth of its value in 2011, holds broader implications for Rio than BHP. Rio became the world's no. 1 supplier of the lightweight metal after buying Alcan in 2007.

"Rio is staring down the barrel of a weakening market for aluminium," said a commodities analyst, who commented on condition of anonymity as he is not authorised to speak about specific companies.

Rio's aluminium production averaged 948,000 tonnes per quarter, or 2.9 million tonnes, over the previous three quarters, suggesting a reduced December quarter would leave full-year production under 2010's total of 3.8 million tonnes.

Credit Suisse on Monday advised clients to expect fourth-quarter aluminium production of 919,000 tonnes.

Last week Alcoa Inc, the largest U.S. producer of aluminium, announced a production cut in response to steep aluminium price falls, slashing annual global smelting capacity by 12 per cent.

Prices for aluminium on the London Metal Exchange (LME) of around $US2,140 a tonne are well below levels above $US2,800 seen last May.

Rio's 175,000-tonnes-per-year Lynemouth aluminium smelter in England is running at a reduced rate after a power cut in December knocked out more than half its capacity

Some in the industry question whether the company will restart the lost capacity, especially after it said in November that it was set to close the Lynemouth smelter as rising energy costs put pressure on margins.

A consultation process on its closure is in progress and due to continue to the end of February.

The company started slashing output at the 438,000-tonnes per-year Alma smelter on Jan. 1 over a labour dispute. The impact of that action will result in lower January-March quarter production figures.

BHP is expected to record aluminium output of just under 300,000 tonnes in the December quarter versus 315,000 tonnes in the prior quarter and 314,000 tonnes a year ago.