United Co. Rusal, the world’s largest aluminum producer, plans to cut output to the lowest in at least eight years as it shutters inefficient smelters.
Production is forecast to be 3.5 million metric tons this year, the Moscow-based company said Tuesday in a statement to the Hong Kong stock exchange.
That’s down 10 percent on 2013 output.
Rising electricity costs and low prices are squeezing producers and there may be up to 3 million tons of capacity cut by 2015, according to Bloomberg Industries.
Alcoa Inc., the largest U.S. aluminum producer, said it closed a smelter and mills in Australia cutting its annual capacity 5 percent to 3.8 million tons.
Aluminum climbed for a fifth time in six days after Alcoa and Rusal’s statements.
The aluminum market has been flooded with excess capacity in China and affected by slowing global economic growth.
Recent efforts by China’s government to tackle overcapacity has “tempered” net capacity increase to 2.2 million tons after shutting down 2.1 million tons, Rusal said. The Chinese market will continue to be balanced, it said.
China’s capacity may increase to 34.2 million tons this year from 30.3 million tons in 2013, which will weigh down prices, Fitch Ratings Ltd. said in a report last month.
While the central government has tried to curb capacity since 2003, local authorities in the western part of the country have continued to approve new smelters to boost economic growth, according to Fitch.
Aluminum for delivery in three months on the London Metal Exchange touched $1,671.25 on Feb. 3, the lowest since August 2009. Prices have declined 18 percent in the past year.
Rusal said aluminum output last year declined eight percent to 3.9 million tons as it cut production at operations in Russia and Nigeria. Alumina production fell two percent to 7.3 million tons.
Global consumption of the metal gained 6 percent in 2013 to 51.7 million tons, while China’s demand surged 13 percent, Rusal said. Global demand will increase another 6 percent this year as the transport sector supports demand in markets including North America and Thailand, it said.