Rusal to boost alumina capacity despite global surplus

Russian aluminium giant Rusal is taking advantage of a slide in the country's currency to boost its alumina production capacity despite a global surplus of the material, an executive said on Wednesday.

Ramping up production would allow the company to take advantage of higher margins offered by the currency differential, as their costs are in the weaker rouble, while export sales are made in dollars.

Rusal expects to add about 430,000 tonnes to its capacity of alumina, an intermediate raw material to make aluminium, through a $34.5 million modernisation programme due to complete in May or June, said Yakov Itskov, director of the alumina division.

Itskov, who did not provide a figure for Rusal's total alumina production capacity, said a slide in the rouble has cut the dollar-denominated cost of capital goods needed for the expansion. "The window of opportunity due to the fall in the rouble allowed us to buy the metal, equipment and services in Russia and the Ukraine," he told reporters.

Rusal is expanding capacity even though a glut in the sector has weighed on prices. The company says global alumina prices have dropped to $197 per tonne in January 2016 from $355 per tonne a year earlier. Oversupply is likely to be cut back this year, however.

After an estimated surplus of 1.5-3.5 million tonnes last year, Itskov said up to 12.5 million tonnes of global capacity could exit the market in 2016 out of total of more than 140 million tonnes.

This will depend largely on China, which is expected to withdraw 7.5 million tons of capacity, helping to offset the commissioning of new capacity, Itskov said.

Amid the tough market conditions, Rusal plans to further cut its alumina production costs in 2016 after reducing costs last year to $243 per tonne from more than $300 in 2014, he added.