RUSAL says export duty may force it to suspend some operations

MOSCOW, Jul 21 (PRIME) -- The aluminum export duty on may cost Russia’s UC RUSAL several hundreds of millions of U.S. dollars, making the company consider suspension of some production capacities, Roman Andryushin, deputy CEO for sales in Russia, CIS, and China, told reporters on Wednesday.

Russia will introduce export duties on ferrous and non-ferrous metals from August 1 through December 31. The duty amounts to 15% plus at least $1,226 per tonne of copper, at least $2,321 per tonne of nickel, and at least $254 per tonne of aluminum.

“Our losses in the half a year when the duty is in effect may reach several hundreds of millions of U.S. dollars. Production of some types of products will become unprofitable. Our estimates show that it will be so for several hundreds of thousand tonnes. If we don’t produce these products, some plants will naturally work below their full capacity with the consequences,” Andryushin said.

“The calculations take into account the fact that we produce 4 million tonnes per year, of which 2.8 million tonnes are exported.”

The company is unable to include the duty into the bulk of its long-term contracts, or to the contracts that encompass price revisions as the market conditions will prevent it. RUSAL will have to think about suspending some production capacities, and may even revise the launch dates of the Taishet Aluminum Smelter, he said.

The company did not raise its prices for rolled metal and reinforcement bars, because the Federal Antimonopoly Service issued a 2013 order prohibiting it from raising prices significantly. The company reports the domestic prices to the service monthly. RUSAL even allowed its clients to fix prices under long-term contracts. Also, the aluminum price is not at its historic peak, it is average, while production costs are high.

“This is why the decision to introduce the export duty was completely unexpected, because RUSAL does not have any excessive profit now, especially at the internal market where we do not simply sell aluminum, but we create products with a high added value together with our clients,” Andryuhsin said.

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