The following article comes from Moscow Times.
United Company RusAl’s shares continued their rally on Tuesday, bringing their two-day gains to more than 10 percent, after the company said it planned to increase aluminium production this year.
RusAl’s stock closed at 8.3 Hong Kong dollars ($1.07), or 3.5 percent higher, adding to Monday’s gains of 6.9 percent for its biggest surge since trading started on Jan. 27. But the recovery was still not enough to recoup early losses for IPO investors, who remain down 14.1 percent.
In a statement released Monday, RusAl said it expected to increase aluminium production by 3 percent in 2010, compared with the previous year. The company also plans to increase alumina output by 7 percent this year.
Separately, RusAl said Friday that it had reached a long-term cooperation agreement with the new Guinean government, easing fears of continued disruptions of bauxite supplies from the impoverished West African state. The material is a key component in aluminium production.
“The trend of emerging from the global recession based on growing orders from our clients in Europe and the United States, as well as active economic growth in Asia, give rise to our optimism regarding the perspectives of the aluminium industry,” RusAl CEO and co-owner Oleg Deripaska said in the statement Monday. “We expect that the stabilization that’s appearing will be replaced by higher-than-anticipated growth of metals consumption relative to production.”
RusAl said its plans to increase output were also based on analysts’ positive 2010 outlook for the aluminium market, which would see a substantial growth.
“A number of experts are forecasting that 2010 will see considerable growth of the aluminium market generated by rising demand from the automotive and packaging sectors,” the statement said, adding that positive dynamics on the market would be driven by the demand from China and India, as well as from developed countries.
Aluminium prices crashed along with demand from industry in late 2008 and early 2009, falling to below $1,300 per metric ton in February 2009, from highs of more than $3,300 in July 2008. Three-month contracts on the London Metal Exchange closed at $2,151 on Tuesday.
There are reasons to believe that RusAl will achieve its production goal, said Nikolai Sosnovsky, a metals analyst at UralSib.
“The increase of 3 percent is not much. RusAl will probably manage to sell such a production volume. Prices are rising and many companies will return capacities. Since RusAl is one of the lowest-cost producers, I think it will manage to return more capacities than the others,” Sosnovsky told The Moscow Times.
RusAl also said its aluminium output dropped by 11 percent in 2009 and amounted to 3.9 million metric tons, compared with 4.4 million metric tons in 2008. Output of alumina – which is primarily used for aluminium production – totaled 7.3 million metric tons, declining by 36 percent from the figure of 11.3 million metric tons in 2008.
Bauxite production declined by 41 percent to 11.3 million metric tons, from 19.1 million a year earlier.
Sosnovsky said RusAl’s year-end production results did not come as a big surprise.
“According to all prognoses, production will exceed demand over the next several years. That’s why RusAl, like many other producers, was cutting output according to the plan,” he said.
RusAl had to cut production because of negative market factors last year, including a 35 percent drop in aluminium prices, the company said in the statement.
Deripaska said the company had become more competitive thanks to its program to cut expenses, a successful debt restructuring and the share listing in Hong Kong and Paris. RusAl reached agreement to cut its debt burden from $16.8 billion to $14.9 billion ahead of the IPO and subsequently used $2.14 billion from the listing to pay down its obligations further.
RusAl raised $2.24 billion in the IPO, selling its stock at 10.8 Hong Kong dollars per share ($1.39). The shares plunged, however, in their first day of trading and lost almost 30 percent of the offering price earlier this month.
On Friday, the company said it had signed an agreement with the Guinean government on establishing a joint commission to provide “a stable basis for long-term and mutually beneficial cooperation.”
The commission will start working by March 1, the statement said.
In January, the former mining minister of Guinea, which is the world’s biggest producer of bauxite, demanded part of the proceeds that RusAl had earned from its IPO, saying the company owed the Guinean government as much as $860 million in damages.
RusAl denied the claims, noting that the former minister, Mahmoud Thiam, no longer represented the government.
Thiam was part of the government of ousted military junta leader Moussa Dadis Camara, who left the country late last year for medical treatment after an assassination attempt. Camara’s government was replaced by the military junta last month.