RUSAL Board approves programme of gradual curtailment of less-efficient capacity

RUSAL, the world’s largest aluminium producer announces that Company’s Board has approved a long-term phased programme of production optimization aimed at substitution of the less cost-effective smelting capacities with advanced cost-competitive facilities.

The programme is intended to maintain RUSAL’s competitiveness on the global scale and reflects the ongoing uncertainty in the global economy, high power tariffs and metal prices downturn. In the framework of the programme, the total capacity curtailments until 2018 will reach 275,000 tonnes of primary aluminium production and will involve the Nadvoitsy aluminium smelter (NAZ), Bogoslovsk aluminium smelter (BAZ), Volkhov aluminium smelter (VAZ) and Novokuznetsk aluminium smelter (NkAZ). 150,000 tonnes of the capacity is expected to be curtailed by end of 2012. The rest will be curtailed gradually up to 2015 at the NAZ and VAZ smelting facilities and by 2018 at pot rooms #3 and #4 of the NkAZ smelter.

The high electricity tariff for the Bogoslovsk aluminium smelter makes the modernisation of the current equipment unfeasible due to both economic and environmental factors. However, BAZ will continue to produce alumina to supply Siberian smelters of the Company. From 2016 the long-term energy supply contracts the VAZ and NAZ smelters are currently under will be finishing and the lack of a favourable tariff means aluminium production uneconomical. NkAZ will curtail production at pot rooms #3 and #4, which form part of Phase 1 at the smelter and about which Government officials have already brought up its potential curtailment several times. Phase 1 accounts for about 15% of NkAZ’s total output.

The curtailed capacities will be replaced by advanced high-efficient smelters in Siberia, in particular, by the Company’s Boguchansky aluminium smelter, which is currently under construction.

In the regions affected by the curtailment programme, the Company together with the Ministry of economic development of Russia, Vnesheconombank, the Ministry of regional development of Russia and local authorities will participate in the realization of a federal programme aimed at supporting monotowns which includes territory development, support of existing and creation of new production facilities in order to create more job opportunities for local residents.

Consequently the announced decision will not deteriorate the social environment and quality of life in these regions. Thanks to subsidies provided by RUSAL in the framework of the federal programme aimed at supporting monotowns, all employees of the capacities to be curtailed will be offered employment. The workers affected by the proposed cuts will be offered either existing jobs at their current smelters, complete retraining within an employment programme, jobs at other Company plants with compensation or given the opportunity to move to other regions to work on new greenfield projects the Company has under construction in Siberia which have a high demand for qualified workers.

The decision of the Board will be fulfilled after the respective approvals are ratified by Governmental bodies and employment solutions for all affected workers are found.


Note for editors: “Monotown” in Russia is a common name for a town whose economy is dominated by a single industry or a plant.