HONG KONG, June 10 -- Oleg Deripaska, the Russian billionaire owner of the world's largest aluminum company, said a slump in prices for the metal may prompt producers to shut smelters, leading to a supply shortfall.

Between 2 million and 3 million metric tons of capacity may be halted in the second and third quarters, potentially causing a "deficit of physical supply," said Deripaska, chief executive officer of United Co. Rusal, in an interview in Hong Kong. About 70 percent of smelters around the world are unprofitable at current prices, he said.

Aluminum prices have declined 20 percent over the past two months in London on concern that the European debt crisis and China's measures to curb its property market will hurt demand and derail the global economic recovery. Prices in China, the largest consumer of the metal, have dropped below the cost of production, Aluminum Corp. of China Ltd. said June 8.

"It's a climate of short-sell," Deripaska said yesterday. "It's the hedge funds and others just playing their games. We can see physical demand is very strong."

Aluminum for three-month delivery rose 1.1 percent to $1,940.25 a ton as of 4:14 p.m. yesterday in London. Prices closed at $1,867.50 a ton on June 7, the lowest level in eight months. Rusal said in April it expects aluminum to average more than $2,000 a ton during 2010.

Currency Concerns Unjustified

Euro-currency concerns, which have contributed to tumbling commodity prices, are unjustified, Deripaska said. A weaker euro will help manufacturing in Germany, Italy, France and eastern Europe, bolstering demand for aluminum, he said.

The decline in the price of aluminum has been led by financial investors, he said. It jars with a seven-year high for premiums on the London Metal Exchange aluminum price that clients pay for delivery of the metal, Deripaska said.

The premiums for the metal over the LME price make it more attractive to sell aluminum to consumers than to investors in exchange-traded funds, he said. The pricing situation may change within the next six months, Deripaska said.

China, the world's biggest producer of aluminum, said in May it will raise power-tariff surcharges for some energy-intensive companies by as much as 100 percent starting this month. That will raise the costs of making aluminum in the nation by $100 a ton, Macquarie Securities Ltd. said at the time. Electricity accounts for about a third of the expense of producing the metal.

Rusal IPO

Rusal held an initial public offering in Hong Kong in January, becoming the first Russian company to list in the Chinese city. The IPO was managed by banks including Russia's VTB Group, which yesterday said it would also consider holding its own share sale in Hong Kong.

Rusal had its offering delayed at least twice by regulators and restricted to wealthy and corporate investors on concern that its borrowings were too high.

The company's net debt shrank to $12 billion as of March 31 as Rusal used the IPO proceeds to repay lenders.

Rusal is likely to earn dividends of about $333 million from its 25 percent stake in OAO GMK Norilsk Nickel, Russia's biggest mining company, after the board approved the payout in May. Norilsk shareholders will meet later this month to vote on the payout and Rusal plans to use the funds to repay creditors, Deripaska said.