HONG KONG — RusAl CEO Oleg Deripaska said Wednesday that 70 percent of smelters globally are unprofitable after the price slumped, and a deficit may occur because of forced shutdowns.
Producers may shut 2 million to 3 million metric tons of capacity in the second and third quarters, which may lead to a “deficit of physical supply,” Deripaska said in an interview in Hong Kong.
Aluminum prices have slumped 20 percent during the past two months in London on concern that the European debt crisis and China’s measures to curb its property market will hurt demand and derail the global economic recovery. Prices in China, the largest consumer of the metal, have dropped below the cost of production, Aluminum Corp. of China said Tuesday.
“It’s a climate of short sell,” said Deripaska. “It’s the hedge funds and others just playing their games. We can see physical demand is very strong.”
Aluminum for three-month delivery rose 0.9 percent to $1,938 a ton at 12:07 a.m. in London. Prices closed at $1,867.50 a ton on June 7, the lowest level in eight months. RusAl said in April that it expects aluminum to average at more than $2,000 a ton during 2010.
Investor concerns about the euro, which has contributed to tumbling commodity prices, is unjustified, Deripaska said. A weaker euro will help manufacturing in Germany, Italy, France and Eastern Europe, bolstering demand for aluminum with it, Deripaska said.
The fall in the price of aluminum is 60 percent because of financial investors, he said. It jars with a seven-year high for premiums on top of the London Metal Exchange aluminum price that clients pay for delivery of the metal, Deripaska said.
The premiums for the metal over the LME price make it more attractive to sell aluminum to consumers than to investors in exchange-traded funds, he said. The pricing situation may change within the next six months, Deripaska said.
RusAl, which has $12 billion of net debt, is likely to earn dividends of about $333 million from its 25 percent stake in Norilsk Nickel after the board approved the payout last month. Norilsk shareholders will meet later this month to vote on the payout, and RusAl plans to use the funds to repay creditors, Deripaska said.