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Alcoa Inc will sell 60 percent of its Russian-made aluminium products to domestic customers this year, up from 50 percent in 2007, as the US firm bets on Russia's economy riding out the global financial crisis.
Alcoa's two Russian plants would reverse current losses as demand grows in tandem with reforms in the aerospace, automotive and shipbuilding sectors, Oleg Kalinsky, chairman of the Alcoa Metallurg Rus plant in southern Russia, said in an interview with Reuters.
"The economic difficulties will not influence our long-term commitment to Russia, because the market will grow," said Kalinsky, who also handles Alcoa's public affairs in Russia.
"The Russian economy is vigilant enough to withstand the crisis."
Pittsburgh-based Alcoa said this month it was halting major capital projects due to uncertain global markets. Operations in Russia, where the company is investing $768 million and employs 7,900 people, would not be affected, Kalinsky said in the company's Moscow offices. Alcoa acquired two aluminium fabrication plants in Russia in 2005 - the Samara Metallurgical Plant, which was the Soviet Union's largest such enterprise, and Alcoa Metallurg Rus, in the southern town of Belaya Kalitva. Neither is yet profitable.
"We understood the road would be difficult, as the assets had not been modernised for 20, 30, 40 years," Kalinsky said. He declined to estimate when the plants might first turn a profit. "When you put so much money in, you do everything possible to complete the investment and start turning a profit," he said.
Alcoa has spent about 90 percent of the total $768 million it plans to invest in Russia by the end of 2008, including the $257.5 million acquisition price of the two plants, Kalinsky said. Per capita aluminium consumption in Russia, at 5-6 kg per year, is about seven times lower than in the United States, where the average person consumes between 35 kg and 40 kg. "Per capita aluminium consumption will increase. When it increases, we will develop in line with this market and will satisfy this market," Kalinsky said.
"When we increase the quality and volume of our product, consumption patterns will also change," he said, adding that end-users would replace imports with Russian-made products. In early 2009, the company will open a new "end-and-tab" line at its Samara plant to produce parts for drinks cans. The parts are currently imported. Kalinsky also forecast strong Russian demand for aluminium in the aerospace and shipbuilding sectors. "In order to develop a diversified economy, not just based on oil, gas and metals, Russia is going into areas such as aerospace and shipbuilding," he said.
Alcoa also will attempt to increase sales of forged aluminium wheels produced at the Belaya Kalitva plant by persuading truck manufacturers to replace the heavier steel wheels more favoured in Russia at present.

Copyright Reuters, 2008

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