Rusal forecasts tighter aluminium market after posting strong profit

World’s second-largest producer predicts shift from surplus to deficit this year

PUBLISHED : Wednesday, 09 March, 2016, 12:04pm
UPDATED : Wednesday, 09 March, 2016, 4:34pm

Rusal, the world’s second-largest producer of aluminium, posted a 126 per cent surge in recurring net profit last year to a four-year high of US$1.1 billion and said it expects the global aluminium market to turn to a deficit from a surplus last year.

It predicts that global demand will remain strong, while Chinese production may grow just 4.8 per cent this year, half the pace of last year and the slowest growth in five years.

“Chinese [semi-finished products] export growth is expected to slow down further in 2016 as compared to 2015 on lower price arbitrage [activities] due to a much lower [price] premium expectation in [the rest of the world], and a higher Shanghai Future Exchange price linked to local capacity curtailments,” the Moscow-based firm said in a filing to Hong Kong’s stock exchange Wednesday.

Rusal forecast that the global surplus of 0.6 million tonnes of aluminium last year would turn into a deficit of 1.2 million tonnes this year.

China accounts for just over half the world’s global aluminium production and consumption.

Rusal said it expected Chinese demand would grow 7 per cent this year to 31 million tonnes, while global consumption growth was projected at 5.7 per cent to 59.6 million tonnes.

The company’s recurring net profit of US$1.1 billion for last year compared with US$486 million in 2014.

Including losses from its nickel unit Norilsk Nickel and value changes in derivative financial instruments and asset impairments, it booked a net profit of US$558 million, compared to a loss of US$91 million in 2014.

The recurring profit rise was mainly driven by a 13.8 per cent fall in the cost of materials, and a 12.9 per cent decline in energy costs, more than offsetting a 9.8 per cent decline in its average aluminium selling price to US$2,001 a tonne.

Materials and energy together accounted for 63 per cent of total cost of sales last year.

Operating profit margin rose to 23.2 per cent from 16.2 per cent in 2014.

A 28.7 per cent decrease in personnel expenses and a 16.8 per cent decline in net finance expenses also helped lift its bottom line.

Rusal’s share price fell as much as 7.1 per cent before ending 2.5 per cent lower at HK$2.73 on Wednesday as part of wider retreat of metals and energy prices and shares after a strong rebound in the past three weeks.