Rusal stays away from fresh investments

Rusal, one of the world's largest aluminum producers, has said it will not continue its investment in China, the world's largest aluminum producer and consumer, as excess capacity in the beleaguered aluminum market will continue for another five years.

"We are not planning to either expand or invest in this market, because Chinese aluminum smelters made irrational decisions. I don't understand why they are building stockpiles even when the growth in supplies has already far outpaced demand," Oleg Deripaska, president of the Russian aluminum producer, told China Daily on Wednesday on the sidelines of an aluminum forum held in Qingdao, Shandong province.

"The continuing blind production from some Chinese aluminum smelters will worsen a global glut for the metal, driving down prices of aluminum products and squeezing profits for producers," said the senior executive.

The Russian company formed a Shenzhen-based joint venture in 2012 with China North Industries Corporation, for trading aluminum in the Chinese market, but the current trading volume is very small in a sluggish market.

The company shut down an aluminum factory powered by a coal-fired station in Shanxi province as it is using hydropower for energy generation.

Last year, China's aluminum capacity hit 44 million metric tons, but its production stood at 23.7 million metric tons. That means the rate of capacity utilization reached a mere 53 percent, a sharp contrast to the international average of over 90 percent.

Two subsidiaries of the country's largest aluminum maker Aluminum Corp of China, or Chalco, including Fushun Aluminum Co Ltd in Liaoning province and its unit in Liancheng of Fujian province, suspended production of all electrolytic cells with millions of tons of capacity, earlier this week.

Jiang Yinggang, vice-president of Chalco, said that the company's subsidiary in Liancheng suffered a deficit of nearly 2 billion yuan ($314 million) over the last five years, and he hopes that the move will ease the pressure caused by oversupply.

"We've invested about 6 billion yuan in this company and if the loss continues to expand at this pace, it will be worthless," he said.

To stay profitable, Fushun Aluminum is shifting its focus to carbon products such as carbon anode block and anode paste.

"The more rational way to deal with oversupply in China is to curb production of raw materials and encourage producers to move toward downstream businesses such as aluminum processing," Deripaska said.

Rusal is currently working with Chalco in areas such as research and development of new technologies in the aluminum industry, development of bauxite resources and investments in integrated hydro-powered aluminum production.