Manama, BAHRAIN, Sep 21, 2010 (Dow Jones Commodities News via Comtex) -- (Adds more quotes with details on Chinese output) Power will remain the central driver of where aluminum production capacity is located, and this will help make China switch eventually to a net exporter of value-added aluminum, the first deputy chief executive of Russian aluminum producer Rusal said Tuesday.
"I doubt Chinese aluminum production will continue to grow," Vladislav Soloviev said. "Sooner or later, it will switch to a net exporter from being a net importer," he added.
China will start to add value to its aluminum output and export it in the form of rolled and other fabricated products, he said.
The Asian country stunned the market a few years ago when it cranked up output dramatically in just a few months, making it the world's largest aluminum producer and consumer.
However, he said that around 50% of China's primary aluminum capacity is inefficient at current prices.
"Around 80% of China's aluminum production is based on coal-fired power generation...these smelters can't produce metal for less than $2,100 a metric ton," he noted. "Eventually the Chinese will understand that it's economically unviable to produce aluminum based on coal-fired power," he added.
Environmental pressures and a desire to limit power consumption would also see output in China fall, he noted.
Around 1.2 million tons of smelting capacity has been cut in Europe due primarily to the high cost of energy, which accounts for around a third of total production costs. In the U.S., around 1.6 million tons of output has been cut, Soloviev said.
"This means capacity going forward will continue to move from locations with high power tariffs to the Middle East, Iceland and Russia, for instance," he added.
Soloviev was speaking at the Metal Bulletin aluminum conference in Bahrain.