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Rusal boosts output by 3.5% but considers capacity cut
Edited by : AL CIRCLE
4 min read
UC Rusal, the world's largest aluminum producer, boosted aluminum output 3.5% year-on-year to 1.049 million tonnes in the first quarter of 2012, the company said in a statement.
However, "in response to continued uncertainty in the global economy, Rusal is currently considering the curtailment of 300,000-600,000 tonnes of high-cost smelting capacity starting from the second half of 2012, with corresponding alumina production to be possibly idled in order to achieve the production capacity balance," it said.
A company presentation for investors says that the drop in output over eighteen months could lead to the shutting-down of capacity, which will not be revived. Earlier, company management said that a contraction would likely affect the company's plants located in the European part of Russia that has high production costs.
The most loss-making primary-aluminum plants remain plants in the company's Western Division Bogoslovsky (BAZ) and Volkhovsky aluminum smelters, Rusal's first deputy general director, Vladislav Solovyev, told investors and analysts during a conference call.
Rusal tried to shut down aluminum production at BAZ in December of last year - but the government stepped in and the decision was made that OJSC IES Holding was to sell Rusal the Bogoslovsky TETs (combined heat and power plant) and the under-construction Novo-Bogoslovsky TETs to ensure the stable operation of BAZ - the biggest consumer of the station's electricity. However, the parties to the deal a little while ago began a public dispute over the valuation of Bogoslovsky TETs and Novo-Bogoslovsky TETs and to this day have not reached an agreement.
Solovyev said a resolution to BAZ's problems can only be found by means of a significant reduction of electric power tariffs, or by completely shuttering unprofitable aluminum production.
"We're trying to find a solution with the generating company IES, but unfortunately, there is no resolution yet. I think we can return to the discussion of this matter with the government very soon," Solovyev said, adding that negotiations could resume this month or early next.
In the cost of selling Rusal aluminum a significant part is power expenses. The company presentation says that the average Q1 2012 charge for electricity (including payment for power, capacity, and transmission) decreased by 15% year-on-year and by 3.4% from Q4 of last year to 3.12 cents per kilowatt.
"The increase [in output] was mostly due to increased production at Kubal of Sweden and certain Siberian (Russia) smelters," the statement said. "Production of value-added products reached 37% of total output in the three months ended March 31, 2012," it said.
"Total alumina output amounted to 2,034 tonnes for the first quarter of 2012, and demonstrated a 1.9% increase as compared to the same period in 2011. The increase in the volume was due to increased production at QAL of Australia and Nikolaev alumina refinery in Ukraine," the statement said.
"Aggregate bauxite production was 3,622 tonnes for the three-month period ended March 31, 2012, as compared to 3,139 tonnes for the same period in 2011 and demonstrated a 15.4% growth. The main factor of growth over the respective period was increased production at Compagnie de Bauxite de Kindia (CBK) in Guinea, Bauxite Co. De Guyana (BCGI) in Guyana, Windalco Ewarton plant in Jamaica and North Urals in Russia," it said.
"UC Rusal expects that the uncertainties seen in 2011 and the first quarter of 2012, namely the current Eurozone financial crisis and slowdown or hard landing in the growth in aluminum demand in China, may continue to dominate the outlook for the metal markets in the months to come, with evidence of potential recovery coming in the second half of 2012," the statement said.
Overall global aluminum consumption in the first quarter of this year rose 5% compared to the same period in 2011 - to 11.2 million tonnes, Rusal said.
Rusal added that "our view is that aluminum consumption in Europe will remain negative in the first half of 2012, offset by moderately higher US demand and continued recovery in the growth in the aluminum consumption in China in 2012.
Rusal previously forecast global aluminum consumption to grow 7% in 2012 to 48.2 million tonnes which, on the back of an expected 2%-3% reduction in global supply volumes, will lead to a balanced market.
Last year, Rusal stepped up primary aluminum production by 1% to 4.123 million tonnes.
However, "in response to continued uncertainty in the global economy, Rusal is currently considering the curtailment of 300,000-600,000 tonnes of high-cost smelting capacity starting from the second half of 2012, with corresponding alumina production to be possibly idled in order to achieve the production capacity balance," it said.
A company presentation for investors says that the drop in output over eighteen months could lead to the shutting-down of capacity, which will not be revived. Earlier, company management said that a contraction would likely affect the company's plants located in the European part of Russia that has high production costs.
The most loss-making primary-aluminum plants remain plants in the company's Western Division Bogoslovsky (BAZ) and Volkhovsky aluminum smelters, Rusal's first deputy general director, Vladislav Solovyev, told investors and analysts during a conference call.
Rusal tried to shut down aluminum production at BAZ in December of last year - but the government stepped in and the decision was made that OJSC IES Holding was to sell Rusal the Bogoslovsky TETs (combined heat and power plant) and the under-construction Novo-Bogoslovsky TETs to ensure the stable operation of BAZ - the biggest consumer of the station's electricity. However, the parties to the deal a little while ago began a public dispute over the valuation of Bogoslovsky TETs and Novo-Bogoslovsky TETs and to this day have not reached an agreement.
Solovyev said a resolution to BAZ's problems can only be found by means of a significant reduction of electric power tariffs, or by completely shuttering unprofitable aluminum production.
"We're trying to find a solution with the generating company IES, but unfortunately, there is no resolution yet. I think we can return to the discussion of this matter with the government very soon," Solovyev said, adding that negotiations could resume this month or early next.
In the cost of selling Rusal aluminum a significant part is power expenses. The company presentation says that the average Q1 2012 charge for electricity (including payment for power, capacity, and transmission) decreased by 15% year-on-year and by 3.4% from Q4 of last year to 3.12 cents per kilowatt.
"The increase [in output] was mostly due to increased production at Kubal of Sweden and certain Siberian (Russia) smelters," the statement said. "Production of value-added products reached 37% of total output in the three months ended March 31, 2012," it said.
"Total alumina output amounted to 2,034 tonnes for the first quarter of 2012, and demonstrated a 1.9% increase as compared to the same period in 2011. The increase in the volume was due to increased production at QAL of Australia and Nikolaev alumina refinery in Ukraine," the statement said.
"Aggregate bauxite production was 3,622 tonnes for the three-month period ended March 31, 2012, as compared to 3,139 tonnes for the same period in 2011 and demonstrated a 15.4% growth. The main factor of growth over the respective period was increased production at Compagnie de Bauxite de Kindia (CBK) in Guinea, Bauxite Co. De Guyana (BCGI) in Guyana, Windalco Ewarton plant in Jamaica and North Urals in Russia," it said.
"UC Rusal expects that the uncertainties seen in 2011 and the first quarter of 2012, namely the current Eurozone financial crisis and slowdown or hard landing in the growth in aluminum demand in China, may continue to dominate the outlook for the metal markets in the months to come, with evidence of potential recovery coming in the second half of 2012," the statement said.
Overall global aluminum consumption in the first quarter of this year rose 5% compared to the same period in 2011 - to 11.2 million tonnes, Rusal said.
Rusal added that "our view is that aluminum consumption in Europe will remain negative in the first half of 2012, offset by moderately higher US demand and continued recovery in the growth in the aluminum consumption in China in 2012.
Rusal previously forecast global aluminum consumption to grow 7% in 2012 to 48.2 million tonnes which, on the back of an expected 2%-3% reduction in global supply volumes, will lead to a balanced market.
Last year, Rusal stepped up primary aluminum production by 1% to 4.123 million tonnes.
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