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Aluminum 2013 price rise depends on China - RUSAL
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Thursday, 21 Jun 2012
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Reuters reported that Russia's RUSAL is prepared to cut output and costs this year to support prices which could recover in 2013 if China also reduces production.

Mr Oleg Mukhamedshin RUSAL's head of equity and corporate development said that "The market price is at a level where about 30% of producers are unprofitable. This means that people are forced to significantly reduce capital expenditures, which leads to stagnation of the industry."

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 and Norsk Hydro to cut capacity. Since then aluminum prices have fallen another 5 percent and forced RUSAL to prepare to shut 250,000 tonnes to 300,000 tonnes of annual capacity this year to support global prices. But RUSAL also expects China to support the global market.

Mr Mukhamedshin said that "This has gone on for long enough and all producers should take responsibility for decisions on production volumes and more actively cut unprofitable production. This particularly suggests China."

Mr Mukhamedshin criticized that this policy, calling on China to cut unprofitable production. Global companies, excluding Chinese producers, have cut output by about 1.3 million tonnes of since December 2011.

He estimated that 6 to 7 million tonnes of aluminum output in China are unprofitable now out of the 22 million that the country is expected to produce this year. The rest of the world has about 3 million metric tons of loss-making capacity.

He said that our Chinese colleagues cut 1.7 million tonnes last year and since January we do not see capacity shutting down in the country which accounts for 45% of global aluminum output. If producers take more responsibility, average aluminum prices can reach USD 2,500 per tonne to USD 2,600 per tonnes in 2013 up from an expected average this year of USD 2,200 per tonnes.

RUSAL is cutting its own cash costs, which were at USD 1,950 per tonnes in the Q1. 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 tonnes eventually.

Mr Mukhamedshin said that last year non recourse project financing for the Taishet aluminum smelter was arranged and the company was expected to start major investments in the project in March. But it now plans to start investing later this year.

He said that decreasing aluminum prices have also helped RUSAL cut spending on power, which accounts for about a quarter of its costs. 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 Q2.

Mr Mukhamedshin said that the company still believed the political situation in the African country would change for the better but was also interested in bauxite mines elsewhere on the continent. There are other fish in the sea. We are also interested in other countries in Africa Sierra Leone, Cameroon and Ghana.

Source - Reuters

(www.steelguru.com)

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