Alcan chief's mettle tested

Dick Evans, head of the Canadian aluminium giant, has the Russians breathing down his neck. But, he tells Nick Mathiason, China is the country that has him most interested - as the driving force behind the lightweight metal's booming price

The Russians are coming and there are few who feel their breath more keenly than Dick Evans who, until last week, was the chief executive of the world's second biggest aluminium company, the Canadian giant Alcan.
Last Monday, however, a three-way deal in Moscow handed dominance of aluminium - a lightweight metal vital for the aeronautical, weapons and motor sectors - to Russia for the first time, with oligarch Oleg Deripaska as the controlling influence. This new force, United Company Rusal, pushed Alcan into third place behind Alcoa. It intends to float in London within two years. Some are speculating whether a move on the $17bn Alcan, which has 65,000 employees in 61 countries, will be next for the acquisitive Russians.

Evans, in London last week, did not dismiss the notion: 'That's possible [but] well down the road because they have got to get their own deal put together and they stated they want to reach a point where they are publicly traded. If they are successful in that then they have the size to consider going further.'

Evans, appointed last year to head the firm, doubts the Russians will use their dominance to destabilise the aluminium market or treat it as an extension of foreign policy in the way they are doing with their energy assets. 'We think they'll be a responsible player and the fact that they want to be publicly traded will result in greater governance practices and transparency. They could ultimately expand, which they stated they would like to, but I see no reason why they would expand irrationally. I think they will make good economic decisions.'

A mid-western American, Evans is an industry veteran with 38 years under his belt. He has lived in Ghana, Zurich and visited China numerous times since it opened up to the West 15 years ago.

It is China that Evans has said is the single most important factor behind the booming price of aluminium, which has doubled in five years. 'Fifteen years ago they were number 10. They are now the world's largest producer and consumer of primary metal. They have about a quarter of the world's production and consumption - [both growing at] over 20 per cent...We don't see a slowdown there. If anything their consumption in the last six months has been higher than we forecast, continuing to surprise people. They have shifted investment to high-value products and they have the Beijing Olympics in 2008. They're politically geared to make that a big success and that's driving a lot of construction and spending.'

Evans's time in China has given him a special insight into its ruling and business class. 'They're entrepreneurial, capitalistic and they move quickly en masse. Because copper prices are so high it appears they're making a concerted effort to shift away from copper wherever they can and the most logical substitute is aluminium - therefore we're seeing growing demand in electrical uses, and if that were to really happen there could be more demand for aluminium.'

Though prospects for the industry have rarely been bettered, shares in the mining and extractive firms have fallen back after a bull run last year. 'There's a disconnect between the commodities markets signalling strong demand and prices. The equity markets have decided on a doomsday scenario for commodities and especially aluminium. There have been big swings in sectorial bets being made in the equity markets. There was lots of money pouring into commodities as they were moving up, arguably taking them above where they should be and now that's flowing back and you're getting the reverse effect.'

Shares in Alcan last year traded at $29, in May they reached $59. They are now $39. 'We are buying back aggressively. We feel it is undervalued at $39.'

Rumours have swept the market recently that mini