Rusal Mulls Further Cuts to Aluminum Output; Price Advances

  • Producer considering reductions of about 200,000 metric tons
  • Company expects premiums to stabilize on cuts to capacity

United Co. Rusal, the aluminum producer controlled by Russian billionaire Oleg Deripaska, may trim output further even as supply cuts are helping to support prices. The metal gained in London.

The producer doesn’t plan restarting smelters idled in 2013 and is still considering further cuts totaling about 200,000 metric tons a year, Moscow-based Rusal said Thursday in a statement, reiterating a strategy outlined last year. Capacity cuts in China saw production in the nation drop in December, highlighting improving discipline on supply in the region, the company said.

“Capacity curtailments are supporting the LME aluminum price and premiums are expected to stabilize at current levels” in the first quarter, the producer said. Rusal sees a global deficit of 1.2 million tons in 2016, compared with a 600,000 ton surplus in 2015, it said.

Prices fell to the lowest since 2009 in November as supply outstripped demand by 300,000 tons last year amid increased supply from China, according to Morgan Stanley. There’s no prospect of any near-term relief, said Novelis Inc., which sees no catalyst to spur prices in the next six months.

Domestic inventories at the largest warehouses in China fell 7,000 tons to 663,000 tons in January, showing evidence of capacity cuts and an improving supply balance, Rusal said. That compares with a peak of 1.2 million tons in May last year, it said.

The metal for delivery in three months gained as much as 1.5 percent to $1,502 a ton on the London Metal Exchange and traded at $1,491 at 3:15 p.m. in Singapore. It’s still 18 percent lower over the past year. Rusal’s average realized price fell 6.2 percent to $1,729 in the three months to Dec. 31 compared with the previous quarter, it said.

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