DAVOS-UC RUSAL chief sees aluminium demand down, govt talks

DAVOS, Switzerland, Feb 1 (Reuters) - World aluminium demand will tumble by nearly a quarter this year and prices will not rebound, forcing major smelters to slash costs or go out of business, said Oleg Deripaska, head of the world's largest producer, United Company RUSAL. "What I think is important for the industry is to really stop hoping and prepare for the worst," Deripaska told reporters on Saturday in quotes approved for release on Sunday. "There is huge oversupply in aluminium ...I believe in the next nine months we will see a completely different landscape for the aluminium industry, which will stay for the next seven to 10 years." The billionaire majority owner of the Russian company said governments were discussing ways to come to an agreement on helping the aluminium market. He gave no specific details. The 41-year-old former commodity trader who built a fortune in the chaotic 1990s, said he expects aluminium prices of about $1,600 per tonne over the next seven years. Aluminium, used in everything from cars and construction to kitchen foil and drinks cans, last traded at $1,355 per tonne for three-month delivery on the London Metal Exchange -- 60 percent below the record peak of $3,380 struck in July 2008. Global aluminium stocks are at their highest in more than 14 years and a Reuters poll of 17 analysts published on Jan. 27 forecast supply would exceed demand by 925,000 tonnes this year. Deripaska said world aluminium demand would fall to 28 million tonnes in 2009 from about 36.5 million tonnes in 2008 and that there was still huge oversupply. "You need to live with the reality, and the reality is there will be no hike in prices," the billionaire, who was appointed CEO on Jan. 18, said. "The only chance to survive is to be the most efficient. And RUSAL will be the most efficient smelter in the world this year. "This is due to the cost-cutting programme and restructuring of our capacity. It is all about costs. The only chance to survive is to cut costs," he said. "I can tell you 75 percent of aluminium producers are below water." SLASHING COSTS Producers worldwide have cut production and jobs in an attempt to stay afloat. U.S.-based Alcoa Inc said last month it would cut over 15,000 jobs, reduce production by 18 percent and halve capital spending. UC RUSAL would slash costs and improve efficiency to ensure it was within the top 10 percent of the most efficient producers by the end of the first quarter, Deripaska said. The Russian company is currently among the top 25 percent. UC RUSAL, whose largest smelters in Siberia benefit from an abundance of cheap hydroelectic power, said in December it would cut output by 2 percent by closing some potlines at two smelters in the Ural mountains. When asked if UC RUSAL would cut production, Deripaska said it would depend on the results of inter-government discussions. He said world governments were discussing ways to help the world aluminium market by reducing capacity. "We welcome now the starting discussions with governments which are now taking place," he said. "As we understand, after the discussions we could see a memorandum which we saw at the beginning of the 1990s when the governments took certain measures to promote reducing capacity. "If these measures are taken in the next 24 months, this would stabilise the market for the interests of both producers and consumers," he said. Deripaska did not say which governments were holding discussions or when a decision could be made. He said if a deal were done, more aluminium would be delivered via long-term contracts. UC RUSAL employs 90,000 people and accounts for about 12 percent of the world aluminium market and 15 percent of world production of alumina, the product from which the metal is made.