Aluminum's 'Happy Times' End

DAVOS, Switzerland -- Oleg Deripaska, United Company RusAl's chief executive and biggest shareholder, said Saturday that he expected "no more happy times" in the aluminum industry as a sluggish global economy saps demand.

Aluminum will average $1,600 per ton in the next seven years, Deripaska predicted, compared with a current level of $1,350. That contradicts a forecast by RusAl chairman Viktor Vekselberg, who said he was "100 percent sure" that the price would reach $2,000 per ton this year.

"What's important at the moment for the metals and mining industry is to really stop hoping and prepare for the worst," Deripaska told reporters in Davos, where he was attending the World Economic Forum.

Russia has pledged more than $200 billion to battle its worst financial crisis since 1998, including $50 billion for companies that have debts with lenders abroad, among them RusAl. The company used its 25 percent stake in Norilsk Nickel, the world's biggest nickel and palladium producer, as collateral for a $4.5 billion loan from state development bank Vneshekonombank.

Deripaska, who Forbes ranked as the wealthiest Russian in April 2008, predicted an aluminum industry shakeup as demand slumps.

Smelters will be shut or will have their capacity lowered, and there will be fewer metal-producing nations as a result, Deripaska said. More metals will be sold under long-term contracts and less on the spot market.

Deripaska and billionaire investors Vladimir Potanin and Alisher Usmanov last month proposed that the government prepare plans to create a consolidated mining company. The merged entity would get access to state funds to repay debt. Deripaska and Usmanov urged the government to become a shareholder in the new company, which would be formed around Norilsk. Deripaska did not include RusAl in his merger proposal.

"There is just an exchange of ideas," he said, referring to the merger. "It should be a real company, not a mass grave."

He reiterated that RusAl would not take part in the holding because it needs to restructure its debt, which Vekselberg puts at $16.3 billion.

"I cannot see the synergy," Deripaska said. "It is as if you cross-breed a chicken and a duck. What do you expect it will do? Fly, or perhaps swim?"

Deripaska also said an initial public offering of RusAl shares was still "on the agenda." He did not comment on the possibility of a private placement of shares in RusAl.