INTERVIEW: RUSAL to cut output at Siberian smelters by 100,000 tns in 2013

Interview with UC RUSAL First Deputy CEO Vladislav Solovyov

MOSCOW, Jun 26 (PRIME) -- Russian aluminum giant UC RUSAL plans to decrease production at Siberian smelters by 100,000 tonnes in 2013, rather than by the 50,000 tonnes planned previously, Vladislav Solovyov, the company’s first deputy CEO, said in an interview with PRIME.

“We have revised this figure. It is possible that we will cut production by up to 100,000 tonnes at different plants in Siberia. This program has been already approved by the board of directors. At the same time, we need to discuss each plant. It is our aim for this summer. However, the 300,000 tonne figure remains unchanged,” Solovyov said.

In March, RUSAL’s board of directors approved reducing production by 300,000 tonnes at the company’s less efficient aluminum smelters by the end of 2013. The company’s initial program of cutting production was announced in August 2012 and envisaged cutting production by 275,000 tonnes in stages until 2018 at the Nadvoitsy, Bogoslovsk, Volkhovsky, and Novokuznetsk smelters.

“The plan (to cut production by) 300,000 tonnes remains, no less, and may be even more. We are redesigning the Volkhovsky plant, which will produce car components. Currently, the plant still has a capacity to produce 18,000 tonnes of primary aluminum. We are also discussing the acquisition of the Ondskaya hydropower station for Nadvoitsky plant, which will be redesigned for foil production. The plant will still produce about 35,000 tonnes of primary aluminum. The question on the Bogoslovsky smelter has already been settled and we are buying the Bogoslovskaya power plant. We will keep only the sixth unit of the plant for aluminum production – this is about 25,000 tonnes of the metal”, Solovyov said.

He added that the company is considering decreasing production at all plants, including the Siberian plants. “It does not always mean the closure of production. We can cut production by decreasing the power supply or carrying out more repairs. It will be applied to almost all RUSAL plants to a different extent, and we will reach the required volume of capacities at all plants together,” he also said.

Solovyov also said that large aluminum producers have already started decreasing production in order to balance the market. “All understand the necessity to cut production capacities. We have already announced a 300,000 tonne reduction. Alcoa will cut the capacities by 486,000 tonnes, while Chalco announced plans to decrease the capacities by 380,000 tonnes, but we will see if this is done,” he said.

As for aluminum price forecast, he said that RUSAL has kept its forecast for 2013 unchanged at U.S. $2,100 per tonne.

“The current market conditions remain difficult. Aluminum warehouse stocks have remained large over last several years. The only good thing is that physical demand is also high, as well as premiums, which are at high levels in all regions: Japan - $250 per tonne, the U.S. - $250 per tonne, Europe - $280 per tonne. But the exchange does not provide a clear view on the situation with demand and supply because of high LME stocks and traders,” he added.

There is currently no such program to cut production for 2014 and the situation will depend on the global market, Solovyov said. “We consider that that globally the aluminum production capacities must be cut by 1.5 million tonnes. I am sure that the reduction will be in 2014 and further,” he added.

The situation around RUSAL’s alumina producing division is more or less balanced, Solovyov said. “Operations at the Friguia bauxite and alumina plant is currently suspended. We are making a technical analysis on it because it has already been at a standstill for one-year and its condition became worse. Based on the results (of the analysis) we will be making decision on the terms of restarting the operations. But it will take time,” he said.

All Russian plants are profitable, so there will not be any reduction. As for the foreign plants, Alpart and Windalco in Jamaica are closed, Friguia is closed, while Italy’s Eurallumina is also being analyzed, Solovyev said that the company plans no additional suspension of production capacities.

RUSAL officials recently visited Indonesia and discussed the possibility of building an alumina refinery in the country. Solovyev said that the company was considering this option in order to have a plant with minimum production costs.

“Indonesia is the major alumina supplier to China - about 60% of aluminum in China is produced from Indonesian alumina. The country is actively developing the mining of bauxites and will be developing alumina production, because the government decided to reduce bauxites exports. Indonesia has large coal reserves, which are needed for alumina production, so it is the perfect place for a plant,” he said.

He also said however that the company does not need additional capacities now. “We already have a development project in Guinea - Dian-Dian. We are also discussing a bauxite project in Sierra Leone and may sign a memorandum of intention this year,” Solovyov said.

As for troubled plants, such as ZAlK in Ukraine and ALSCON in Nigeria, Solovyev said that the company has no plans to abandon these projects. “The court hearings (on ZAlK) are scheduled for the end of the year. We are absolutely sure that we are right. The claims of Ukrainian politicians are groundless”, he said.

The court proceedings on the ALSCON plant are continuing, and it will last two more years. “RUSAL has a clear position. If you want to take the plant back, return our $500 million investment. Otherwise we will stay,” Solovyev added.

UC RUSAL produces about 10% of the world’s aluminum output. The company is present in 19 countries.

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