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12. March 2009

Alcoa sees China as linchpin in aluminum market

Reuter citing Mr Klaus Kleinfeld CEO of Alcoa Inc while speaking to Reuters Global Mining and Steel Summit as saying that China has been the linchpin in the global aluminum industry with its sizable production cuts and measures to boost industrial demand, steps that have brought the global market into balance despite a rapid decline in the metal price Mr Klaus Kleinfeld credited China's massive smelter production cuts of over 20% which turned China into a net importer of the shiny metal, as helping to bring the global aluminum market roughly into balance. He added, however, that the market outside of China is still running a supply overhang of more than a million tonnes, which, if it continues, could pressure Alcoa to cut more capacity at its US smelters, its highest cost producers.

Mr Klaus Kleinfeld said "So the pressure is still on. We'll continue to look at our situation and then decide what to do about it. But it's possible. He said that almost none goes to inventories. Almost all goes to real projects. One thing about China's planned economy is that their economic stimulus program has really focused on what I would call 'the shovel-ready projects.'" Despite its rapid response to a deteriorating market, Mr Kleinfeld said China cannot lead the world economy out of its current downturn and puts that role on the United States, whose own economic stimulus package has a smaller allotment for infrastructure and will take much longer to go into effect. He said that still, China holds attractive prospects for investment opportunities. Though last year it ended an agreement with China Chinalco to buy a stake in Rio Tinto that will return more than USD 1 billion of cash back to Alcoa, Mr Kleinfeld added that the company was still seeking strategic opportunities with Chinese companies, including the state owned aluminum group.

He added that "I believe China has a very bright future. We have some investments in China. But I'm open to looking at other opportunities or the Chinese market or together with Chinese players. We have strengths in our cooperation with Chinalco, but there are also other co-operations that we have in place. He said two weeks ago, Alcoa signed a memorandum of understanding with Yunnan provinces for joint ventures involving operations from smelting to fabricating.”

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