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Rusal stands by Norilsk stake, growth forecasts

Keywords: Tags  Rusal, Oleg Mukhamedshin, Viktor Vekselberg, Oleg Deripaska, aluminum, Norilsk Nickel, Suzy Waite

NEW YORK — United Co. Rusal has no intention of selling its stake in MMC Norilsk Nickel despite reporting a $1.4-billion write-down on its share of the company in its 2011 financial results, Rusal deputy chief executive officer Oleg Mukhamedshin told AMM.

"Our strategy hasn’t changed. We plan to hold it," Mukhamedshin said.

The comments come less than two weeks after Rusal chairman Viktor Vekselberg suddenly resigned in a move some attributed to disagreements over whether to sell the company’s 25-percent stake in Norlisk Nickel (AMM, March 13). Vekselberg supported a sale of Norlisk Nickel, but chief executive officer Oleg Deripaska has refused, maintaining it is a long-term investment.

The public fallout between the former chairman and the company, coupled with poor earnings—Rusal reported a 91.7-percent drop in net income to $237 million in 2011 from $2.87 billion in 2010—hasn’t changed Rusal’s long-term plans, according to Mukhamedshin.

"We’re on the road meeting with investors explaining our results," Mukhamedshin, who spent this past week traveling in the United States to meet with investors, told AMM in a telephone interview from Boston. "We have two teams traveling all over the world meeting with key investors, (something) we do every quarter after financial results."

He declined to offer details of the conversations, but Rusal’s planned direction under its new chairman, Barry Cheung, is thought to be at the forefront of the discussions. Cheung, a non-executive director of the board since 2009, began his new role March 16.

"(Barry’s) key goal is to improve corporate governance on the board level," Mukhamedshin said. "He’s also going to participate in our investor relations and improve the overall relationship between the board and the public."

Management shake-up aside, Mukhamedshin said Rusal remains fairly bullish for 2012, forecasting global growth of 7 percent in primary aluminum consumption and anticipating all regions outside of Europe will experience a pickup this year.

Rusal predicts aluminum consumption in China will increase by 11 percent this year; India by 10 percent; Russia, 6 percent; Japan, 5 percent; North America, 5 percent; and Latin America, 5 percent. Meanwhile, European consumption will be flat this year, the Russian company said.

Despite a reasonably optimistic outlook, the Russian producer has publicly stated that it is contemplating cutting its total aluminum production by 6 percent in the next 18 months, although this number isn’t set in stone, Mukhamedshin said.

"We should decide by the end of the year," he said, adding that if the company goes ahead with possible capacity curtailments it will likely occur at its high-cost smelters in Europe.

Meanwhile, the company continues to invest in the modernization of 10 smelters to produce value-added aluminum products, and in the next five years aims to increase output to 2.4 million tonnes from 1.5 million tonnes (AMM, Jan. 19, 2011).

Rusal will spend $55 million to modernize five of its smelters in Western Russia—Volkhov, Volgograd, Kandalaksha, Nadvoitsy and the Urals. Rusal completed the Volkhov modernization in December, which now produces A356.2 alloys, mainly used in wheel disks (AMM, Feb. 20).

The aluminum producer will also increase value-added product output at Siberian smelters in Krasnoyarsk, Bratsk, Sayanogorsk, Irkutsk and Novokuznetsk, he said.

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