Aluminum Price to Be Sustained, Europe Premiums to Stay `Firm', Rusal Says

Aluminum prices will be sustained for the rest of the year as “strong demand” from China and recovering consumption in the U.S., Europe and Japan support the market, said United Co. Rusal, the world’s largest producer.

The premium for spot contracts with deliveries to Europe increased by 90 percent to as much as $180 per metric ton since the start of the year on a delivered, duty paid Rotterdam basis, and the premium is likely to “remain firm throughout 2011,” the company said in statement accompanying its earnings.

Aluminum for three-month delivery dropped 8.5 percent on the London Metal Exchange this year to $2,041 a metric ton as of 12:42 p.m. in Singapore today. The price has slumped 18 percent from an 18-month high of $2,494 a ton on April 16 on signs the global economic recovery is faltering. Rusal, controlled by billionaire Oleg Deripaska, had a better-than-expected profit in the second quarter as prices climbed faster than costs.

China, the biggest producing and consuming country, will increase its imports of primary aluminum in 2011 and 2012 as more than 25 percent of domestic producers are unprofitable at current prices because of increased electricity tariffs, raw material costs and wage inflation, the company said.

Government curbs on outdated facilities and a strengthening currency may reduce production in China by 1 million tons to 1.5 million tons on an annualized basis, it said.

Aluminum stockpiles are forecast to drop by as much as 5 percent by the end of 2010 and to decline throughout 2011 and 2012 as demand recovers, the company said. While profitability of financing “may be challenged by rising interest rates and holding costs,” improved physical demand will absorb any “releases” from warehouse inventories, it said.

London Metal Exchange stockpiles totaled 4.45 million tons as of Aug. 27. China may increase output by 30 percent to 16.9 million tons this year, with consumption growing by 20 percent to 16.7 million tons, the company said.

To contact the Bloomberg News staff on this story: Jason Scott in Perth at jscott14@bloomberg.net

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