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Rusal forecasts 2017 Chinese aluminum deficit amid anti-pollution push

Following a relatively balanced year in the Chinese aluminum sector, United Co. RUSAL Plc is expecting the market to turn to deficit due to a government push to minimize pollution from industrial activities, Rusal's head of research said March 17.

During a conference call following the company's 2016 financial results, Denis Nushtayev said the Chinese Ministry of Environmental Protection has adopted a plan to cut capacity and production from November through March, which will lead to an annual loss of between 1.2 million and 1.3 million tonnes of aluminum supply.

On the demand side, the Chinese market is expected to grow to 33.9 million tonnes this year, while global demand is forecast to rise to 62.7 million tonnes, from 59.7 million tonnes last year, driven by the construction and transportation sectors, according to Rusal.

During the call, Director of Corporate Finance Elena Ivanova spoke about the steps the company had taken to manage its debt portfolio at the beginning of 2017. In January, Rusal paid off part of an existing PXF facility with US$310 million it had received in Norilsk Nickel dividends. Ivanova also referenced the $600 million debt offering in February.

"The net proceeds were used for partial refinancing of the same existing PXF facilities scheduled in 2017 and 2018. As a result, we actually deferred our current amortization under PXF until April 2018," she said.

CapEx is expected to rise 10% in 2017 to US$600 million, with planned investments at Rusal's Dian-Dian bauxite project in Guinea and the construction of anode plants at the Volgograd and Taishet aluminum smelters, said CFO Alexandra Bouriko. When asked about the prospect of dividends in 2017, Bouriko said the company's priority would continue to be the reduction of debt, and the final decision would depend on market conditions.