Alcoa Says Restarting Chinese Smelters May Harm Aluminum Market

May 11 (Bloomberg) -- Alcoa Inc., the largest U.S. aluminum producer, said restarting Chinese smelters would harm a market still struggling to cope with a global surplus of the metal. “There are rumors of smelter restarts in China,” Executive Vice President Bernt Reitan said today in an interview at the CRU World Aluminium Conference in Dubai. “There is no need for restarts when you look at the global supply and demand balance. We’re still in a situation of significant oversupply.” China is the world’s largest producer of aluminum. Prices of the metal, used in cars, planes and drinks cans, have fallen 48 percent in the past year as stockpiles monitored by the London Metal Exchange more than tripled to a record 3.9 million metric tons. Alcoa, led by Chief Executive Officer Klaus Kleinfeld, has cut output by about 20 percent, slashed 13,500 jobs and sought pay cuts from workers as prices tumbled. China has been “extremely disciplined” in cutting its capacity by 20 percent and the local market is now a “pretty balanced system,” Reitan said. Restarting production again would be “negative” for the aluminum market, he said. A government stimulus package may deliver “modest growth” in demand this year in China, the largest consumer, compared with a projected 7 percent drop in world aluminum use, Reitan said. European and North American demand will slide 15 percent. New York-based Alcoa curbed output in the U.S., Canada and Australia by a total of 850,000 tons a year. United Co. Rusal and Rio Tinto Group, the largest producers, also slashed output. World production will have to fall further to cope with the aluminum surplus and Alcoa will continue to adjust output when required, Reitan said. As much as 100,000 tons of metal is being delivered into LME warehouses each week, he added. “The bigger that pile of metal becomes, the longer we will take to get out of this,” Reitan said. “It’s hard to see the market improving for aluminum while that stockpile is there.” Alcoa reported a $497 million net loss on April 7, leading to its first back-to-back quarterly losses since 1994. To contact the reporter responsible for this story: Brett Foley in London at bfoley8@bloomberg.net