Reuters reported that UC Rusal expects no significant fall in London Metal Exchange warehouse aluminium stocks currently well above 4 million tonnes by the end of 2011.
Mr Steve Hodgson CEO of the Russian aluminium producer's marketing unit said that “It is interesting that we saw stocks peak at a little over 4.7 million tonnes but they've come back down again and we've got quite a large number of cancelled warrants in the market today."
He said that warrants are material that is earmarked for delivery. Perhaps that signals a little that stocks may come down but I think we're still looking at over 4 million by the end of the year. Aluminium inventories in LME registered warehouses were at 4.631 million tonnes. They have been above the 4.0 million tonnes level for around two years.
Mr Hodgson estimated that 70% of LME inventories were tied up in financing deals adding that the current supply and demand balance was reasonable. A typical financing deal consists of buying nearby aluminium from a producer, selling it forward at a profit and striking a deal to store it cheaply for an extended time period.
Mr Hodgson said that UC Rusal was set to increase its output to 4.8 million tonne to 4.9 million tonnes by 2015 or 2016 depending on the completion of its Taishet project. That compares to 4.08 million tonnes of aluminium produced by the company in 2010.
He said that our objective is for value growth as opposed to tonnes growth. Taishet and Boguchany are part of that margin growth. He predicted the company's Boguchany project would begin metal production in the Q1 of 2013. It's alive, it's happening. We're budgeting on that metal in our plans from 2014 onwards.
Mr Hodgson said that he expected China to become a net importer of the metal within a few years. We are bullish in terms of the fundamentals that would support China becoming a net importer over the next 3 to 4 years. That being energy availability, the appreciation of the reminbi, wage inflation, the cost of developing new assets and of courses a very bullish demand profile.
He said that UC Rusal had decided to restart production in Jamaica, a major bauxite producer in order to go long on alumina. We have a desire to be long on alumina but to be sensibly long and Jamaica's restarting in Kirkvine and Windalco is just about responding to the price signals that would indicate that we could incorporate that profitably into our portfolio."
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