RUSAL expanding aluminum capacity

The world's top primary aluminum producer, United Company RUSAL, said on Wednesday it has $3 billion to spend on upgrading its assets and investing in new projects.

"We have a strong balance sheet at the moment thanks to the high commodity prices," Artem Volynets, the company's strategy and corporate development director, told the Reuters Global Mining and Steel Summit in London.

The price of aluminum has risen by 25 percent since the start of 2006 and prices were seen to remain high on the back of demand growing between 3 to 5 percent annually.

"We have five big projects that we are currently investing in as well as a number of blue sky opportunities," he said.

Last year, Rusal acquired a 77.5 percent stake in the Aluminum Smelter Company of Nigeria (ALSCON), which will start production by the end of 2007. By 2009 it would produce 193,000 tonnes per year at full capacity, Volynets said.

Construction was also progressing at its 750,000 tonnes-per-annum aluminum smelter in Taishet, a small town near Irkutsk, which is expected to be completed by 2010.

UC RUSAL was formed in March by a merger of privately owned Russian firms RUSAL and SUAL and assets of commodities trader Glencore. It produces 12.5 percent of the world's primary aluminum and accounts for 16 percent of total alumina output.

"We are currently selling that excess alumina on the open market but we are gearing up additional smelting capacities to use this excess alumina," Volynets said.

RUSAL would build more smelters only where there is access to cheap energy, Volynets said.

"In smelting you go where there is available power: South East Asia, Vietnam, Laos, Venezuela and Middle East," he said.

Comparatively high electricity prices in Europe and North America could force smelters to close in these areas when these firms renew their energy agreements, he said.

"Russia and the Middle East will continue to have a more competitive environment," Volynets said.

Energy costs amount to 40 percent of the total production cost of primary aluminum.

Earlier this week Rusal, which is building the huge Boguchany power station jointly with hydroelectric power firm Hydro OGK, said it was interested in bidding for other energy assets.

Already Rusal has an agreement with Russian atomic energy agency Rosatomprom to possibly build a nuclear power plant and aluminum smelter in the Russian Far East.

Rusal also holds a memorandum with Papua New Guinea's Ministry of Petroleum and Energy to explore jointly the potential for energy and aluminum developments there.