UC RUSAL sees aluminium stocks rising into 3rd-quarter

* Plans to lower production costs to $1,000/tonne by Q4 * "Absolutely" no plans to abandon Boguchany smelter project MOSCOW, May 19 (Reuters) - Aluminium stocks in London Metal Exchange warehouses will keep rising until at least the third quarter of 2009, the world's largest producer said on Tuesday, as stocks hit an unprecedented high of above 4 million tonnes. United Company RUSAL, controlled by Russian billionaire Oleg Deripaska, will tackle the global surplus by reducing production costs to an average $1,000 per tonne by the fourth quarter from $1,300 today, a senior company official said. "The market has been in oversupply and we expect LME stocks to continue increasing until at least the third quarter of this year," Artyom Volynets, UC RUSAL's director of strategy and corporate development, told reporters. Aluminium MAL3 has more than halved in value since hitting a record $3,380 a tonne last July. Crumbling demand from the car and construction sectors, key consumers of aluminium, have been largely responsible for the subsequent build-up in stocks. LME stocks of aluminium MAL-STOCKS rose 3 percent to 4.06 million tonnes on Tuesday. Analysts have said the inventories could rise to 4.5 million or even 5.0 million tonnes this year, before demand picks up enough to chip them away. [ID:nLC786254] Volynets said there were signs the market was recovering in China, although any sudden bounce back in prices was unlikely. "Demand for our products will start increasing, but this year will be a difficult year. We, as well as many other producers, have to focus on cost reduction," Volynets said. Indebted UC RUSAL has unveiled plans to save $1.1 billion this year as it cuts aluminium output by 11 percent. In the first quarter, it made a saving of $554 million. [ID:nLL637986] RUSSIAN CONSUMPTION UC RUSAL, supplier of 12 percent of the world's aluminium, has returned to profit after cutting costs, Volynets said. "After cutting costs, we are now earning money at an operational level," he said. Benchmark three-month aluminium was trading at about $1,520 a tonne on the LME on Tuesday. Volynets said UC RUSAL sold about a quarter of its products within Russia, where per capita aluminium consumption is below 10 kg per year compared with about 40 kg in the United States and 50 kg in Germany.