Rusal expects aluminium prices to stabilize within a range of $1,600-1,700 per tonne

Reuters Russia Investment Summit in Moscow drew a number of prominent figures from the most important industries in Russia and the globe.  During the summit, Rusal, the aluminium major and a major player in Russian economy forecasted that aluminium prices would stabilise within a range of $1,600-1,700 per tonne next year provided China works on its capacity control measure and global aluminium inventory falls and there is a check on Chinese aluminium semis exports.

While announcing the results for the 2nd Quarter and 1st Half ended 30 June 2016,  RUSAL estimated that the global aluminium market will show a deficit of around 1 million tonnes in 2016 as a result of strong aluminium demand growth, increase in the global aluminium supply and falling.

Due to the gut in the market, downstream aluminium suppliers, especally to the transport and packaging, has been under pressure for some time. According to a Reuters survey, in 2016 aluminium prices will be at an average of $1,565 a tonne, near current levels .

"The aluminium market has in fact found its stabilisation point this year for the first time in five years," Rusal Deputy Chief Executive Oleg Mukhamedshin said during the Reuters Russia Investment Summit in Moscow on Friday.

"We expect the global deficit to be 700,000-800,000 tonnes this year. The figure is quite symbolic, taking into account expected consumption of 60 million tonnes. It is important because it shows the market is pulling out of the situation of excessive production," he added.

After ruling for years as the world's top aluminium producer, Rusal’s position has been taken over last year by China's Hongqiao. Considering the oversupply in the market and the low aluminium prices, Rusal has been closing loss-making aluminium plants and the company has reduced its own capacity to a considerable extent.

However, there are other investments on aluminium. Mukhamedshin also said that Rusal has started a trial run of its new Boguchansk smelter in Siberia with an annual capacity of 147,000 tonnes. Rusal is also trying for $800 million financing for its long-standing Taishet project and to build 430,000 tonnes of annual capacity by 2018.

"About $800 million has already been invested in the Taishet project, and construction works were active there before the financial crisis of 2008 ... If we do not want to write off this money, construction must be completed," he said.

Rusal is now working towards expanding the capacity of Siberia smelter to the originally planned 960,000 tonnes. The net debt of Rusal was $8.3 billion after the second quarter 2016. The company is looking at financing support as well as partnership with power companies for hydroelectric power.

Mukhamedshin added that if Rusal goes ahead with Taishet smelter, it will not increase the capacity of Boguchansk smelter beyond 300,000 tonnes. He forecasts a 7-8 per cent increase in Rusal’s aluminium sales volume in Russia and the Commonwealth of Independent States (CIS) as the company expects consumption in this region to rise to 2 million tonnes in 5-7 years from the current 1.4 million tonnes.

Rusal has an aluminium production target of around 3.68 million tonnes for 2017.

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