Russian aluminum giant advises on China's overcapacity

Local implementation is key to China's recent efforts to curb overcapacity in its aluminum sector, said the head of Russian aluminum giant United Company RUSAL (UC RUSAL) at the 2013 Summer Davos.

In an interview with Xinhua, Oleg Deripaska, chief executive officer (CEO) of UC RUSAL, said the company foresees a substantial slowdown in China's aluminum capacity growth due to a price decrease and the recent regulations issued by the Chinese central government.

"New standards for the aluminum industry are under way, increasing industry entry thresholds for new projects and operational standards for existing plants," Deripaska said, adding that this is a stage that all emerging economies must reach during their development.

But he noted that implementation of the measures issued by the central government must be guaranteed at local levels.

Despite the problem of overcapacity, Deripaska considers the Chinese market "highly attractive" to new investments.

"Even at 7-percent growth, the Chinese economy will double in size in 10 years. This was the reason behind RUSAL's decision to form a joint venture with China North Industries Corporation," the CEO said.

Official data showed that the capacity utilization rate for the country's alumina, electrolytic aluminum and steel sectors in 2012 stood at 72.5 percent, 78 percent and 67 percent, respectively.

China has been trying to curb overcapacity as part of its efforts to shift the economy away from investment in heavy industries. In late July, President Xi Jinping urged that tackling overcapacity should be prioritized, with more efforts to boost industrial restructuring.

Also in late July, the Ministry of Industry and Information Technology ordered some 1,400 companies in 19 sectors to eliminate outdated production capacity by September and eliminate excess capacity by the end of the year.