Rusal says further cuts in output aren't needed

Russian aluminum producer United Co. Rusal said it doesn't need to deepen production cuts if aluminum prices stay above $1,400 a metric ton, but said prices aren't expected to recover significantly until 2011. Rusal's director of strategy, Artem Volynets, said he thinks the aluminum market has bottomed out and that "the only way now is up." He said the decline in European demand for the metal is slowing, while Chinese demand continues to rise. "The main support comes from China, where the green shoots are already growing into tall trees," he said. The stance marks a change from March, when the company said it didn't rule out doubling its cuts. Rusal had earlier announced a 500,000 ton, or 11%, cut in its production of aluminum, which is used in the struggling automotive and aerospace sectors. A price recovery will start at the end of this year, with a slight improvement next year, Mr. Volynets said. But prices are expected to rise significantly only in 2011, as demand returns to pre-crisis levels and supplies are hampered by project delays and smelters put off-line, he said. Aluminum prices, which stood at around $1,400 a ton in March, are currently up 8% at $1,512 a ton. That is still down 55% from the peak of $3,380 a ton last July. Separately, Oleg Mukhamedshin, Rusal's director for capital markets, said he expects the company to secure an extra seven to eight years to repay its $7.3 billion debt to international banks and said it doesn't plan to surrender a stake in the company as payment. Rusal, controlled by indebted billionaire Oleg Deripaska, also hopes this month to reach agreement with Russian state bank VEB on extending repayment of the $4.5 billion loan on which its stake of about 25% in nickel miner OAO Norilsk Nickel depends. Rusal has been given the go-ahead to extend its standstill agreement with banks by one month until June 11, giving it room to negotiate its debt restructuring with its international lenders. The standstill agreement covers more than 30 transactions, including syndicated and bilateral loan agreements, bank guarantees and letters of credit. Mr. Deripaska, once Russia's richest man, is scrambling to save his heavily indebted business empire, of which Rusal is the centerpiece. He won a bailout loan from Russia late last year, but officials have since said they will no longer offer financial lifelines to struggling tycoons. source：online.wsj.com