UC Rusals’ long time CEO and industry veteran Alexander Bulygin sees fundamental changes in the global aluminum industry following the collapse in prices over recent months. Bulygin confirmed our reports earlier this week that 75% of producers in Europe, the United States and China are operating below their cost of production at current prices. If current price levels persist, there will be widespread smelter closures in 2009, a situation UC Rusal sees as very much to its advantage. With 12% of global primary aluminum production and 15% of global alumina production, UC Rusal claims top dog among the world’s aluminum producers. Much of the firms’ production is still in Russia and based on low cost hydroelectric power but in recent years the firm has acquired facilities in Guinea, Nigeria, Jamaica, the Ukraine and so on either as green field sites or more often through Rusal’s merger of Sual and Glencore last year.
With revenues of over $12b per annum and a secure low cost production base, Rusal is well placed to expand market share further if, as they expect, high cost facilities elsewhere are closed. Mr Bulygin didn’t mention how he intends to finance any further expansion however. Reports suggest that Rusal have already approached the Russian government seeking state aid to meet debts to western banks due to be rolled over before the end of 2009. Rusal is believed to have borrowed $14b to finance upgrades to existing facilities and the building of new ones.
Though UC Rusal remains in private hands, the firm is 57% owned by Russian oligarch Oleg Deripaska. Consumers will probably not fret too much by the firm taking a larger market share. But Europeans are only too well aware how private firms can come under state control or influence in Russia – as seen in the supply of oil and gas – which is used for political ends.