Rusal sees deeper global aluminium deficit

2017-07-26

Jul. 13, 2017 - Rusal has resumed construction of its long-stalled Taishet aluminium smelter project in Siberia in expectation of a widening global aluminium deficit, the company said two weeks ago.

Rusal needs a further $700 million to complete the project, having invested about $800 million in Taishet before it was halted in 2013 because of falling aluminium prices.

Aluminium prices have jumped by 12% to $1,887 a tonne since the start of January and Rusal expects them to climb above $1 900 by the end of the year, said deputy CEO Oleg Mukhamedshin, citing the company's belief that the global deficit will reach 1.8 million tonnes in 2018, up 500,000 tonnes this year.

The deficit expectations are largely down to top producer China's decision to order steel and aluminium producers in 28 cities to make heavy output cuts during the winter as Beijing intensifies its war on smog.

"In this respect, we have a large competitive advantage related, above all, to the fact that we have resumed the Taishet aluminium smelter construction," Mukhamedshin said.

The first line of the smelter, with annual capacity of 430,000 tonnes, will be built by 2020 and Rusal is on track to agree financing with banks including state-run Vnesheconombank by the end of the year, he said.

Mukhamedshin added that Rusal, controlled by Russian tycoon Oleg Deripaska, is also in talks to create a 50-50 joint venture for the project with state-controlled power company Rushydro.

Rusal has said previously that it plans to expand annual capacity at its Boguchansk smelter in Siberia to 298,000 t by 2018, up from 149,000 tonnes.

Mukhamedshin said that this plan was unchanged but further expansion of Boguchansk will depend on progress at Taishet and whether Rusal decides to proceed with an upgrade of its Khakas smelter in Siberia.

Speaking to the company's future plans, Mukhamedshin said that Hong-Kong listed Rusal would consider placing a new tranche of its Chinese yuan-denominated Panda bond, depending on market conditions. Rusal placed a debut tranche in March.

The current Panda bond programme expires early next year and Rusal could start talks with China on a new programme in the autumn, he added.