RUSAL Bullish on Aluminum Prices, Says Deputy CEO

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Source: Reuters Insider

RUSAL is sitting pretty these days.

As the world’s largest aluminum maker by output — responsible for about 4 percent of the global aluminum production — the Russian company has a rosy outlook on where prices are going in 2011, mainly due to China’s import needs. (The company already purchased a 33 percent stake in Chinese aluminum trader Shenzen North Investments.) The implications of Russia’s metal industry relations with emerging economies, China and India in particular, are huge.

See what Maxim Sokov, RUSAL’s head of strategy and deputy CEO had to say about it in a recent Reuters Insider interview.

Check out the video here, or click on the image above.

–Taras Berezowsky

Comments (5)

  1. Paul Adkins says:

    Taras,

    A little analysis will speak volumes. Not necessarily in order, but consider:
    “Aluminum consumption in China will double by 2020.” If you understand compound growth, you will realise that this is tantamount to saying that the growth in China will slow down dramatically. it has been running at 20% per year, and although we think it will slow down somewhat, maybe to 12%. Even at that rate, it will more than double in less than 8 years.

    “China will become a net importer in 2011.” Setting aside the fact that China already imports huge amounts of scrap (as they recognise the value of the energy cost better than anyone), such a statement completely ignores three categories of production:
    * smelters currently constrained due to energy restrictions
    * smelters completed construction recently, but awaiting the new year to get started
    * new smelters (or brownfields) due for completion in 2011.

    We estimate there is at least 4 million tonnes across these three categories. Considering that China will produce about 16.5 million tonnes in 2010, that means that consumption will have to roar ahead in order to demand incresed imports of primary metal.

    Since consumption will come in at about 16 million to 16.5m, depending on who you believe, consumption will need to grow by 25% for the the market to go out of balance. Oh wait – it is only going to double in 10 years. So which is it?

    Rusal has been talking this line for some months now, and you are helping them by repeating the story without analysis.

    Consider one other question – if China is set to be a large scale importer of metal, have you checked the total capacity of Rusal’s smelters in Eastern Siberia, and their “free metal” not already committed to other markets? Or consider this – it costs a whole lot of money to build the hydroelectric schemes that are needed in order to support the size of smelting that would be needed to sustain large-scale sales to China.
    Hopefully Rusal’s bankers, for whom that media frenzy was no doubt designed, will examine the numbers more closely than the rest of the market seems to have.

  2. tberezowsky says:

    Hey Paul,

    Thanks for your input. I’ll certainly consider your constructive points.

    Dude looks good in the suit, though, right?

    Kidding.

    TB

  3. Paul Adkins says:

    He’s not my type, but no doubt he was given the gig because he passed a screen test, and can speak English.

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