LONDON--Russian aluminum producer United Co. Rusal PLC (0486.HK)
and Aluminum Corp. of China Ltd. (ACH), or Chalco, will decide in
late June the outcome of a joint-venture accord to consider
cooperation on four projects in the aluminum sector, Rusal's deputy
chief executive, Oleg Mukhamedshin, said in an interview
Wednesday.
"It's likely that one or more of these projects would go ahead,"
Mr. Mukhamedshin told Dow Jones Newswires, during the CRU World
Aluminium congress. "It's clear that the market doesn't need more
metal (though the project) could substitute lossmaking
installations in China, or elsewhere."
The aluminum market is currently in a glut, with around 10
million metric tons of inventories worldwide, which need to be
drawn down if prices--currently a third below their 2011 peak--are
to recover, said the executive.
Rusal and state-owned Chalco signed a memorandum of
understanding on cooperation in the aluminum sector in March,
witnessed by the premiers of both countries. The accord has
explored the potential for setting up a joint aluminum smelter in
Siberia to supply the Chinese market with metal, and to cooperate
on further development of Russian energy supplies for export to
China, including exports of oil as well as natural gas from Siberia
to northwest China, the Rusal executive said.
"China has previously focused on domestic production of
aluminum," he said. "China already imports energy from
Russia.....aluminum is a solid form of power, so it makes sense to
supply primary aluminum."
China, the world's biggest primary aluminum producer, is
expected this year to produce 24 million metric tons of the metal,
about half of expected world consumption. However, the industry is
undergoing major upheaval as the government has withdrawn power
subsidies from some smelters, leaving as much as one third of the
country's massive primary aluminum production "below the water," or
unsustainable, with new capacity now replacing inefficient and
obsolete installations, Mr. Mukhamedshin said.
"Some 1.2 million tons of capacity has been idled (in China) to
date, we don't see a risk coming to the market from China," he
said.
In addition, the accord envisages cooperation between the two
major aluminum producers on processing red mud, a by-product of
alumina production, developing alternative ways of sourcing
alumina, and the joint development of new bauxite deposits in third
countries, Mr. Mukhamedshin said.
Both China and Russia have bauxite reserves which are
insufficient for the needs of their primary aluminum smelters. The
joint-venture accord between the producers has examined options
available for importing bauxite, the Rusal executive said.
Rusal has already developed an alumina refinery which uses
nepheline ore, instead of bauxite, to produce alumina, which is
later processed into aluminum. In addition, it is developing
techniques to produce alumina from clay and coal ash, he said.
Write to Diana Kinch at diana.kinch@dowjones.com and Francesca
Freeman at francesca.freeman@dowjones.com
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