Rusal deputy CEO sees China moving into aluminium deficit in 2015

UC Rusal, the world’s largest aluminium producer, said it expects China’s aluminium industry to move into a deficit in the next couple of years as the country begins to transfer industry to the western provinces.

China would try to solve one of its key problems, high power costs, not by cutting gross domestic product but by moving industry towards cheaper sources of power, deputy chief executive Oleg Mukhamedshin told Mining Journal.

He expected the country to spend the next 10 years developing the western provinces, which will require a lot of investment in infrastructure and new construction, and to shut down a lot of capacity in the leading aluminium provinces where power tariffs are high.

“There will be a deficit during this transition so our expectation is that by 2015 China will import up to 1.5Mt of aluminium, which is not much but at least it means a certain deficit,” he said. “The market is more worried about potential export of aluminium out of China, which would push the price down. This is in conflict with the strategy of the Chinese government.”

He expects the deficit to be covered by Russia and other neighbouring countries.

Mr Mukhamedshin said that while it takes China only around 12-18 months to build a smelter, he estimates that it would take about five years or more to move all infrastructure from the central provinces to the west. “The issue is infrastructure,” he said.

He also noted that China is now the world’s largest car manufacturer and will also soon cover all aircraft demand from internal supply.

Elsewhere, he also confirmed that the company was not aware of any negotiations regarding the sale of its 25% blocking stake in Norilsk Nickel.

“As a representative of the management I am not aware of any discussions around the Norilsk Nickel stake. At least the management of the company is not involved. The position of the company is well known, we think it is a long-term investment,” he said.

Rusal’s former chairman Viktor Vekselberg, who departed earlier this month, said Rusal was in “deep crisis” and overburdened with debt. Rusal bought the stake in Norilsk Nickel, the world’s largest nickel and palladium producer, for about US$14 billion in 2008, leaving it in debt.

Mr Mukhamedshin was in charge of Rusal’s US$11.4 billion debt refinancing that took place in October. He said the company has no large debt repayments to make this year, that US$1.3-1.4 billion is due next year and about US$6.5 billion by late 2016.

“In terms of debt repayments we are pretty comfortable for the next four years,” he said.