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Russia: Rusal aluminium production flat as depressed prices take their toll

Low aluminium prices and ‘investor sentiment’ are behind UC Rusal’s flat production figures for the year ended December 2012.

The Russian aluminium giant – the world’s largest producer – says that total aluminium output for the fourth quarter of 2012 decreased by 2.1% to 1.03Mt compared with 1.06Mt for the same period in 2011. Across the whole year, Rusal produced 4.17Mt compared to  4.12Mt in 2011.

The company’s share of value-added products output increased to 39% of total aluminium production, compared with 36% in 2011 and revenue increased by 2.4% to $2.6 billion compared with $2.5 billion the previous year.

The cost per tonne of aluminium was reduced to $1,946 per tonne (down 1.9%) in 2012 compared with $1,984 in 2011 and power tariffs were down 9% at USc.3.17/KWh compared with USc.3.48/KWh in 2011.

Adjusted EBITDA was $915 million for the year-ended 31 December 2012 with a margin of 8.4%. In Q4 2012 adjusted EBITDA was $221 million compared to $30 million in Q3 backed by stronger revenue and lower costs.

Oleg Deripaska, UC Rusal’s CEO, said that 2012 remained ‘particularly challenging’ for the aluminium industry despite global consumption rising by 6% to 47.4Mt. He said that ‘negative investor sentiment’ had prompted LME prices to decrease by 15.7% year-on-year, taking a large share of the global production capacity to – or below – break-even point.

“Whilst UC Rusal’s long-term focus on operational efficiency and cost control has allowed the company to address these challenges, the unfavourable market conditions and lower LME price has inevitably impacted the operating results,” he said, adding that, through its lower cost smelters and its capacity to optimise production, Rusal has demonstrated its ability to respond to challenging market conditions. He said that continued focus on cost control, together with longer-term growth projects and a robust financial position means that the company remains ‘confident in our ability to deliver value and growth for all stakeholders.’