Rusal sees Asian markets as key drivers for rebounding demand

PUBLISHED : Tuesday, 13 April, 2010, 12:00am
UPDATED : Tuesday, 13 April, 2010, 12:00am

Russia's Rusal, the world's largest aluminium firm, yesterday painted a rosy picture for 2010 pointing to rebounding demand, higher prices and increased capacity utilisation.

'Asian markets will be key drivers for demand going forward,' said Artem Volynets at a press conference to announce Rusal's 2009 annual results. 'We are seeing a very strong rebound in global demand led by the restocking and continuing growth in China,' he said, adding that the physical market was very tight as reflected by the historically high premiums over London Metal Exchange prices for aluminium in Japan and the United States.

Rusal yesterday announced a net profit of US$821 million compared to a net loss of almost US$6 billion in 2008. The earnings figure was better than market expectations of about US$500 million and came despite a sharp decline in revenues of 48 per cent due to lower aluminium prices and volumes.

Management said the results were due to cost cutting and the mothballing of less efficient plants with aluminium production being reduced by 11 per cent to 3.9 million tonnes.

Alumina production was restricted by 36 per cent and bauxite production scaled back by 43 per cent.

'The year was one of the toughest on record for the global economy, commodity markets in general and, in particular, the aluminium industry,' chief executive Oleg Deripaska said.

Profits were also boosted by non-cash gains in Rusal's 25 per cent stake in metals giant Norilsk Nickel, whose value rose 123 per cent during the year to US$6.7 billion and since the beginning of 2010 has jumped to US$10 billion. The purchase of the stake at the top of the market in 2008 was a significant contributor to Rusal's massive losses last year.

Rusal's debt stood at US$13.9 billion at the end of 2009 and was reduced to US$12 billion following its Hong Kong initial public offering in January. 'We are well ahead of our debt repayment schedule,' said deputy chief executive for capital markets, Oleg Mukhamedshin.

With China accounting for 35 per cent of global consumption and growing at annual rate of 17 per cent it was looking at consuming three million tonnes of aluminium. Demand for the metal in the rest of the world was growing at 10 per cent.

'Aluminium will significantly outperform all other base metals over the next five years,' Volynets said.

Rusal shares have performed poorly since the initial public offering in January, slipping from its listing price of HK$9.80 to as low as HK$7.47, a decline of 23 per cent.

However, over the past month as aluminium prices have risen, Rusal's share price has clawed its way back to HK$9.48, still 3 per cent below its offer price.