Rio Tinto Says 2.6 Million Tons of New Aluminum Capacity Likely

Sept. 9 (Bloomberg) -- Rio Tinto Group, the world's second- largest aluminum producer, said high production costs that are forcing rivals to idle refineries make it more likely Rio will complete the addition of 2.6 million tons of aluminum capacity. Rio Tinto is studying new plants and expansions using hydropower and other technologies as rising energy costs force competing refineries out of business, Jacynthe Cote, chief executive officer of primary metal for Rio Tinto Alcan, said today in an interview. The projects in Canada, Malaysia, Saudi Arabia, Iceland, Oman and Cameroon would start in 2011 to 2014. ``Forward prices have gained, reflecting higher input costs, and they're holding there,'' Cote said. ``So when we look at our base of projects, especially in Canada, which are mainly driven by low-cost hydroelectricity, we want to accelerate our projects.'' China's biggest aluminum producers agreed in July to cut output by as much as 10 percent to ease a power shortage that has increased expenses. Global aluminum output won't meet demand next year because of higher production costs, helping to push the cash price in London to $4,960 a metric ton by 2011, Robin Bhar, a metals analyst at Calyon in London, said at a presentation delivered today in Montreal. Aluminum for delivery in three months on the London Metal Exchange fell $47 to $2,603 a ton today. ``For the last five years, the Chinese have supplied the global deficit in a way that has deterred others from expanding,'' Michael Komesaroff, managing director of metals industry consultant Urandaline Investments Pty., said in an interview. ``China's going to slow down while demand won't slow, so any extra production elsewhere is going to be well-received.'' The Rio Tinto projects under consideration include a 400,000-ton-a-year capacity increase at a plant in Jonquiere, Quebec, from an initial plan of 60,000 tons. Rio is spending about $6 billion in Canada to boost smelting capacity and take advantage of interest-free loans and long-term water rights granted by provincial governments.