MOSCOW (Reuters) - Russia’s state-controlled power company Rushydro may join a new aluminum smelter project which Rusal, the world’s second-largest aluminum producer, plans to build in Siberia, the board chairman of Rushydro told Reuters.
Rusal, ranked the world’s No.2 producer after China’s Hongqiao, is resuming work on the Taishet project, which it had previously set aside due to low prices, now that global aluminum prices are on the up.
The move reflects its belief that the aluminum deficit will widen globally, stoking demand.
“We will discuss this at the board meeting. In general, I think that taking such a decision (to join the Taishet project) is possible,” Yuri Trutnev, also Russian deputy prime minister in charge of developing the Far East, told Reuters.
The project will allow Rushydro to sell excess power and permit Rusal to return to its pre-crisis output levels of over 4 million tonnes of aluminum a year. It now produces 3.7 million tonnes. Rushydro’s board is set to meet on Aug 30.
“If we ask the question: Would it be good to have a top-notch aluminum smelter in Taishet or not? Of course it would be good,” said Trutnev. He said the board would discuss a proposal to enter the project on a 50/50 basis with Rusal.
Producing aluminum, which is used in the construction, transport and packaging industries, requires a lot of energy. The Siberian project is well located to potentially supply China with aluminum.
Aluminum prices have jumped 22 percent to $2,071.50 a tonne since the start of the year as China, which accounts for nearly 60 percent of global aluminum output, plans to slash production to cut pollution.
Rusal sees the global deficit reaching 1.8 million tonnes in 2018, up from around 1 million tonnes this year. It plans to build the first line of the Taishet smelter, with an annual capacity of 430,000 tonnes, by 2020. Russia already has around a dozen aluminum smelters.
Rusal, controlled by tycoon Oleg Deripaska, needs a further $700 million to complete the project, having invested about $800 million in Taishet before construction was halted because of falling aluminum prices.
Rusal plans to agree the extra financing this year. It has said that Russian state banks may provide the loans.
“Rushydro is taking part in the project (so) I think with such a structure, we will get the funding sorted out,” said Trutnev.
Russia began to look at possible opportunities in the east more actively after it was hit with Western sanctions in 2014 over its role in the Ukraine crisis.
Trutnev said that China is the largest investor in Russia’s Far East.
“China has shown interest in the Northern Sea Route project. If it comes to life, their (Chinese) cargoes will reach Europe faster and more cheaply,” said Trutnev.
Russia hopes the Northern Sea Route, which runs from Murmansk to the Bering Strait near Alaska, could become a mini Suez Canal, cutting sea transport times from Asia to Europe.
Trutnev said that infrastructure such as ports and refueling stations had to be set up along the route for it to be successful and said he expected to get an answer from China on their interest in the project soon.
”It’s not strategically right to do such projects without partners,“ he said. ”Risks should be shared. If, for example, the Northern Sea Route was built by us alone, wouldn’t there (one day) be a reaction of ‘you built it so you use it’?.
“This is the route for their cargo so they (the Chinese) should be involved from the very start.”
Trutnev said he was keen for South Korea and Japan to get involved in the project too.
Editing by Andrew Osborn and Adrian Croft