Rusal Says Output Falls 10%, Near Agreement on Debt (Update1)

July 17 (Bloomberg) -- United Co. Rusal, the world’s largest aluminum producer, cut first-half output by 10 percent on weaker demand and said talks about debt restructuring are almost complete. The Moscow-based company, controlled by billionaire Oleg Deripaska, produced 1.98 million metric tons of aluminum in the first six months, it said today in a statement. Output of alumina, a refined powder used to make aluminum, fell 34 percent to 3.7 million tons. The collapse in commodities, stocks and the ruble in the past year forced Rusal to freeze construction projects, idle plants, cut costs and seek new terms on about $14 billion of debt. Rusal extended to July 28 the deadline for renegotiating $7.4 billion of borrowings that’s due to foreign lenders. “The negotiations on the terms and conditions of the long- term debt restructuring are almost finalized,” Rusal said in the statement. The company plans to sign an agreement with lenders “within the validity period of the standstill agreement.” By July, the Russian company cut average production costs by 27 percent compared with December because of lower raw- material and electricity prices. Cost reductions may reach $1.1 billion this year, Rusal said. Aluminum for delivery in three months on the London Metal Exchange has advanced 28 percent since trading at $1,279 a ton in February, its lowest in more than 7 years. State-run Vnesheconombank, or VEB, last month extended by a year to October 2010 the deadline for Rusal to repay $4.5 billion, as part of a program to lengthen maturities on loans to Russian companies. The VEB refinancing was a “big help” in negotiating with foreign creditors, Rusal Chairman and shareholder Viktor Vekselberg said last month. Rusal’s board will discuss talks with creditors at a July 23 meeting, he said.