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RUS - Aluminum prices will rise on spending and output cuts - Rusal

Bloomberg reported that United Co Rusal, the world's largest aluminum producer said prices for the metal will rise next year as China's economy grows and as Western governments use monetary policy and spending to stimulate demand.

Mr Artem Volynets Moscow based Rusal's director of corporate strategy said prices will rebound in 2010 after bouncing around" USD 1,400 to USD 1,500 per tonne this year while economic stimulus measures and production cuts take effect. He said that I don't believe people when they say we're not at the bottom yet. There will be very significant upside potential to prices in 2010 when the global economy comes out of the financial crisis. After the production cuts, there will be no new supply coming on to deal with the demand."

Mr Volynets said while the aluminum market is unbalanced at the moment as much as 6.5 million tonnes of capacity, or 17% of last year's global output has been idled. That may rise to more than 20% as more operations are curtailed. He said that China alone has closed about 27% of its capacity, and we have yet to see the impact of that. We won't see the full impact from all these curtailments until the middle of this year."

Mr Volynets said by the end of next month, Rusal will have shuttered 500,000 tonnes of its higher cost capacity and will re evaluate its options for further cuts after that. The cuts and the depreciation of the Russian currency have helped reduce its operating costs by 30% since December, and the company is targeting a further 25% reduction. He said that "I think we will emerge a very different company in two or three months. Our debt repayment profile will be vastly different and our cost of production will be much lower."

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