Aluminium outlook seems good for Rio's Alcan takeover

Resource giant Rio Tinto Ltd looks to have timed its takeover of Canadian aluminium producer Alcan Inc to perfection, with the long-term outlook for the base metal remaining strong. The $US38.1 billion ($A44.03 billion) takeover of Alcan by the world's third largest mining company will position Rio Tinto as the biggest global producer of aluminium. Goldman Sachs JBWere (GSJBW) said the long-term outlook for the price of the metal was encouraging, following a couple of years of weakness. "We envisage a closely balanced market in 2009 and global deficits in 2010 and 2011, accompanied by a price recovery," GSJBW said in a client note. "Contributing to this change, we believe will be marked slowdown in metal production growth in China as government policies in that country eventually begin to curb expansions in this highly energy-intensive sector. "In this environment, we believe that there will be a widening competitive advantage for aluminium smelters that are able to secure genuinely long-term, low-cost power tariffs, preferably from non-carbon-based energy sources such as hydro or nuclear power." This bodes well for Rio Tinto, which will benefit from Alcan's abundant supply of hydroelectric power in Canada. Rio Tinto chief executive Tom Albanese was also bullish on the outlook for aluminium after he announced the takeover bid on Thursday. "The demand outlook for the next 10 years is quite positive, with expected world demand growth to 2011 of over 6 per cent and demand growth in China alone of 15 per cent per year," Albanese said. The pending acquisition is the first significant move for Rio Tinto, which hasn't made a major purchase since 2000 when it swallowed up North Ltd.