Rusal Looks To Rebound In 2010

The world’s biggest aluminum and alumina producer has released its production results for 2009 and provided an outlook for what a stronger 2010.

In 2008 Moscow-based Rusal accounted for 11% of the world’s supply of aluminum and 13% of alumina. While the company did not release its stake in global production for 2009, its own production was down from the year previous owing to the global recession.

Total aluminum production came in at 3.9 million tonnes, 11% less than in 2008, and the decline was even larger on the alumina side. Rusal produced 7.3 million tonnes of alumina in 2009, a massive 36% decrease from 2008.

With both aluminum and alumina production down, bauxite production was off as well. Rusal says it produced 41% less of the material in 2009 than it did in 2008, with the final tally being 11.3 million tonnes.

The only aspect of its production that remained unchanged was that of aluminum foil and packaging production.

“The past year tested the resilience of the aluminum industry and forced every company to respond to the downturn,” Oleg Deripaska, chief executive of Rusal, said in a statement.

He went on to say that the company weathered the global economic downturn by cutting costs, restructuring debt and floating its shares on the Hong Kong and NYSE Euronext Paris stock exchanges.

Such changes have Deripaska optimistic about the coming year.

“We have laid a solid foundation for the further sustainable development of our business,” Deripaska said.

But such development will come only with an increase in demand for Rusal’s main products, and fortunately on that front the company says it is seeing signs of a recovery.

Rusal says orders from Europe and the U.S. are increasing, and continued economic growth in Asia bodes well for the industry.

“We believe that the stabilization that is now being seen will lead to consumption growth exceeding the pace of production increases,” Deripaska added.

Such a scenario should benefit aluminum prices, and could go a long way towards making up for what was, by all measures, a bad past year.

Indeed, 2009 will go down as one of the toughest years for the aluminum industry.

According to CRU Group — an international consultancy group specializing in mining and metals — the recession brought an 8.2% drop in demand for aluminum in 2009 compared to 2008.

That weaker demand translated into lower prices as the average price for aluminum fell by 35%.

In response to those poorer fundamentals, aluminum producers as a group cut annual production by about 2.4 million tonnes, and new facilities that could bring 3.5 million tonnes a year were postponed.

Overall, global aluminum production dropped 5.9% to 37.8 million tonnes in 2009.

Rusal curbed its own aluminum production by suspending its “least cost-efficient smelters,” which included three smelters in Russia and one in the Ukraine.

Alumina production was cut at relatively high-cost facilities, such as Aughinish in Ireland and the Zaporozhye alumina refinery in the Ukraine.

Alumina output was also suspended at the company’s Eurallumina project in Italy, and Windalco and Alpart facilities in Jamaica.

The situation for aluminum overall, however, did begin to improve in late 2009 when the revival of developed economies triggered restocking throughout the production chain and boosted demand, the company says.

As for 2010, Rusal is expecting growth in the aluminum market due to rising demand in the automotive and packaging sectors.

CRU expects consumption to grow by 12.6% in 2010 as compared to 2009.

Rusal says should such a positive scenario develop, it would increase aluminum production by 3% this year and alumina production by 7%. It says it could meet such increases at its existing plants.