MOSCOW Russian aluminum giant Rusal (0496.HK) expects aluminum prices to stabilize within a $1,600-1,700 per tonne range next year if China does not increase production, global stocks keep falling and demand grows.
Aluminum, used in transport and packaging, has been under pressure for some time due to oversupply. This year it is forecast to average about $1,565 a tonne, near current levels CMAL3, according to a Reuters survey. COMMODITYPOLL01
"The aluminum market has in fact found its stabilization point this year for the first time in five years," Rusal Deputy Chief Executive Oleg Mukhamedshin said at 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," Mukhamedshin said.
Overtaken last year by China's Hongqiao (1378.HK) as the world's top aluminum producer, Rusal has been a proponent of shutting down loss-making aluminum plants and the company has reduced its own capacity.
However, since then Rusal has started a trial run of its new Boguchansk smelter in Siberia which has an annual capacity of 147,000 tonnes.
The company is also in talks with Russian and foreign banks to organize $800 million of project financing for its long-standing Taishet project and to build 430,000 tonnes of annual capacity there by the end of 2018, Mukhamedshin said.
"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 started building the smelter in Siberia in 2007. Rusal is not looking to raise the project's capacity to the originally planned 960,000 tonnes.
According to Mukhamedshin, the agreement with banks is expected to be reached by the end of 2016, and Rusal, whose net debt was $8.3 billion at the end of June, hopes that Rushydro (HYDR.MM) or another Russian generator of hydroelectric power will partner the project.
Rusal is still on track to raise Boguchansk's capacity to 300,000 tonnes but will not increase it further if it decides to go ahead with Taishet, he said.
"The capacity which we are slowly launching is in the horizon of more than three years, this metal will be supplied to Russia's domestic market. This should not have any effect on price outside Russia."
He sees Rusal's aluminum sales in Russia and the Commonwealth of Independent States (CIS) rising 7-8 percent in 2017 from 800,000 tonnes in 2016. Aluminum products consumption in Russia and the CIS is expected to rise to 2 million tonnes in 5-7 years from 1.4 million tonnes now.
Rusal plans to keep its 2017 production steady at around 3.68 million tonnes of aluminum.
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(Additional reporting by Svetlana Burmistrova, Diana Asonova and Christian Lowe; editing by David Clarke)