Bloomberg News

Rusal Plans to Keep First-Quarter Output Stable, Sell Inventory

February 14, 2012

Feb. 13 (Bloomberg) -- United Co. Rusal, the world’s largest aluminum producer, plans to keep output stable in the first quarter, and sell some of the stockpiles accumulated last year, as prices rise.

“We plan to keep the volume of production stable in the first quarter,” First Deputy Chief Executive Officer Vladislav Soloviev said today on a conference call with reporters. The company confirmed it may cut output by about 6 percent in the next 18 months.

Rusal shifted sales of about 100,000 metric tons of aluminum produced last year to the first quarter of 2012, according to a statement on production results published today via the Hong Kong stock exchange.

Aluminum prices declined almost 30 percent by the middle of December to $1,962 a ton from a peak in May, prompting Alcoa Inc. and Rio Tinto Group to start idling capacity. Prices are recovering, with a 12 percent gain this year to $2,267 today.

Rusal expects global demand growth for the metal to slow this year as consumption in Europe remains little changed, according to the company’s statement.

Global aluminum demand may gain 7 percent to 48.2 million metric tons this year, down from last year’s increase of 10 percent to 45.1 million metric tons, Rusal said.

Aluminum, used in cars, packaging and houses, has declined 10 percent in the past year, hurting producers such as Rusal and Alcoa Inc., which last month booked its first loss in two years. Global capacity may be curbed by 6 to 8 percent in the first half of this year, Rusal said. This means that about 4 million tons of capacity may be culled from the market, Deputy CEO Oleg Mukhamedshin said today on the conference call.

“2012 is forecast to be a very challenging year for Europe,” the Moscow-based company said today. Customer destocking from last year may now have stopped, Rusal said.

Rusal shares fell 2.7 percent to HK$6.45 at the 4 p.m. close in Hong Kong compared with a 0.5 percent gain in the benchmark Hang Seng index.

“About 31 percent of China’s aluminum production capacity may be unprofitable now,” Rusal said. That is equivalent to about 5.9 million tons a year, it said.

Still, the company sees a “potential recovery coming in the second quarter of 2012” as demand will grow 11 percent in China and 10 percent in India this year, it said.

Rusal’s aluminum output last year increased 1 percent to 4.1 million tons compared with the year earlier, it said today. Production in the fourth quarter rose 1 percent on year to 1.06 million tons, it said.

--Editors: Torrey Clark, Randall Hackley

To contact the reporters on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net; Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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