Russian Aluminum Companies in the Context of the Global

Aluminum Industry Development

Victor ZhirnakovDeputy Director General

of Aluminum Business

Russian Metallurgy: Strategy and Growth RestrictionsMarch 29th, 2006, Moscow

2

Russian Metallurgy Today

place among federal budget sources

place in terms of incoming foreign currency flow in Russia

of industrial output

of exports

of net income in the Russian industry

________________________________________

Source: Russian Federal Agency of Industry, Successes and Problems of the Russian Metallurgical Industry Report, May 2005

2

2

19%

18%

11%

40%

3

Russia as a Part of the Global Aluminum Industry

SUAL25%

RUSAL75%

Worldwide

Russia

Others64%

Russia12%

China25%

4

RUSAL’s Position in the Industry

Source: Companies’ press releases

RUSAL was established in2000 as a result of consolidation of the largest domestic aluminum smelters

Third place in the world in terms of aluminum and alloys output

Company turnover in 2005 –USD 6.1 bln.

Investments into production development in 2005 – USD 1.5 bln.

80% of the output is exported

Primary Aluminum Output by Company – 2005

0500

1 0001 5002 0002 5003 0003 5004 000

Alc

oa

Alc

an

RU

SAL

Hyd

ro

BHPB Sua

l

Cha

lco

Rio

Tin

to

Dub

al

CVG

ths.

tons

5

We have our locations in 13 countries of the world and 9 regions of Russia, our products are exported to 50 different countries

RUSAL: from Siberia to Global Economy

*

NGZ

BrAZ

AGKKrAZ

NkAZ

CBK

SAZSAYANAL

ARMENAL

ROSTARDOZAKLMOSMEK

ASK

Chinese Branch (Beijing)RUSAL America Corp. (New York)

German Branch(Düsseldorf)

Headquarters, Moscow

BAC (Fria)

**

*

Bauxite, alumina

Offices/BranchesAluminum productionAluminum products

*

Rostar-Vsevolzhsk

*

*

Japanese Branch (Tokyo)

Singapore Branch

BGZ

* Australian Branch

BCGI (Guyana)

Alumina refinery Queensland Alumina Ltd.

Rogun HEP

Tajik Branch

Bauxite and alumina complex, Komi-Aluminum Project Northern Onega bauxite deposits

HEPs

ALSCON

6

Basic Trends in the Global Aluminum Market

Demand for aluminum growing worldwide

Prices on energy resources rising

Competition for access to raw materials

Consolidation in the industry

Inefficient facilities close down

The “Chinese factor”

7

Aluminum Demand and Supply on the Global Scale

mln

. ton

s

2000 2001 2002 2003 2004 2005 2006 2008 2010

Global demand Global supply

4038363432302826242220

8

Increasing Demand by Regions

By 2015 China will be consuming 33% of the global aluminum output (vs. 21% today)

In the next 10 years, China will be responsible for 52% of the growing global demand for aluminum

The demand in Brazil and CIS countries will be growing just as fast yet the starting point is much lower

India is likely to surprise with unpredictable demand growth rate

Source: RUSAL data

Demand (breakdown by region, 2005 – 2015)

0

10

20

30

40

50

60

2005 2015

Млн

. тонн

China North America Western Europe Russia + CIS Brazil + India Other

32,0mt

51,4mtaverage annual growth rate 4,9%

33%

18%

17%

4%6%

22%

percentage ofglobal demand

percentage ofglobal demand

China

North America

Western Europe

CISBrazil + India

Other

21%

23%

22%3%5%

26%

9

Output Consumption Net value

Russia in Focus

‘000 МT

-6000-4000-2000

0200040006000 5000

-1000

4000

Russia

Source: RUSAL, Brook Hunt

-6000-4000-2000

0200040006000 3600

-900

2700

today

Forecast for 2009

Global demand for aluminum:

3030031800 32900

3450036000

37500

0

5000

10000

15000

20000

25000

30000

35000

40000

2004 2005 2006 2007 2008 2009

'000

MT

760 795 835 875 910 950

0200400600800

1000

2004 2005 2006 2007 2008 2009

'000

MT

Russia (consumption):

9200

-9000

200

-10000

0

10000

Forecast for 2009, China:

10

Establishing New Production Capacities

• Capacity 300 ths. tons per annum• Cost USD 710 mln., the first newly built

aluminum smelter in Russia in the last 20 years

• The first stage should be completed by 2006creating over 1000 new jobs in the region

• Capital investments into the regionalinfrastructure – over USD 21 mln.

• New production and environmental standards

Khakas Aluminum Smelter• Capacity 600 ths. tons• Investments up to USD 2 bln.• First output of metal in 2009• Creating about 1700 jobs at the

smelter and about 500 more jobs in auxiliary facilities

Smelter in Irkutsk Region

11

Modernization of the Operating Production Capacities

To reduce the environmental load and increase the output of primary aluminum

• Modernization of KrAZ, BrAZ, NkAZ (2005-2010)• Aluminum output increased by 300 ths. tons• Significant improvement of the environmental situation• Reduced production costs

12

Those who Have Access to Power and Raw Materials Rule the World

2 major components in the production cost of aluminum:

• Electric power costs – (25% - 40%) • Raw materials (alumina) - (40%-60%)

13

Power Factor

• 150% - average power tariffs growth rate for aluminum companies worldwide in the last 4 years

• 514 ths. tons – reduction of aluminum output in 2005 due to the close-down of unprofitable facilities in the USA and Europe

• 765 ths. tons – expected reduction due to the unprofitability of production in 2006

• Search for new projects in regions rich with power resources

14

Changes in Aluminum Production Capacities

2004

1980

Western Europe

22%

USA29%

Others49%

Western Europe

14%

USA10%

Others76%

15

RUSAL – Power and Metallurgy Company

Aluminum Smelters

Power Stations

16

RUSAL’s Investments into New Hydropower Projects

Krasnoyarsk territoryHEP capacity 17.6 bln. KWhNew aluminum smelter, capacity 600 ths. tonsBuilding infrastructure and creating preconditions for the Downstream Angararegion development

Joint Project with the Tajik GovernmentHEP capacity 4 bln KWhBase for industrial development of the Republic and electric power export

Boguchansk Power and Metallurgy Complex

Rogun HEP

17

Access to Resources

Up to 80% of bauxite resources belong to 5 countries - Guinea, Jamaica, Brazil, India, and Australia

About 20 bln. tons of bauxite prospected worldwide

The majority of deposits are in concession of large international aluminum companies

In the last 2 years, the spot price on aluminum has increased 4 times and it keeps growing

The main reason is the active development of the Chinese aluminum industry

18

RUSAL’s Prospects for Self-Sufficiency in Terms of Raw Materials Supply

Alumina Output(ths. tons)

2000 2001 2002 2003 2004 2005 2013

1990 2085 21612982 3140

8000

3947

19

RUSAL’s Investments into New Projects Related to Raw Materials

Largest smelter in the worldRUSAL’s share 20%22% increase of RUSAL’s self-sufficiency in terms of raw materials supply

Joint project with SUALOutput – 6 mtpa of bauxite, 1.4 mtpaof aluminaThe share of domestic resources increases from 40% to 80%

QAL Aluminum Smelter (Australia)

Komi-Aluminum Project

20

+ Abundant hydroresources

Technology and domestic scientific developments

Low capital investments into aluminum projects

Pluses and Minuses of the Russian Aluminum Industry

–High transportation costs

Limited resources of raw materials

Underdeveloped domestic market

21

Entering international markets, partnerships

Three Keys to Success

Low domestic consumption

High transportation costsand access to power

Tough competition for access to resources

Developing sales abroadand contact with end users

Long-term partnershipsand own power resources

22

47 00047 000

RUSAL Today

in the world

in Russia

of the global market

mln. tons of aluminum

mln. tons of alumina

bln. turnover

bln. investments in 2006

employees

2+2+

$6,1$6,1

3,93,9

10 %10 %

№ 3№ 3

№ 1№ 1

2,72,7

23

RUSAL Tomorrow

producer of aluminum in the world

in terms of output and performance

mln. tons of aluminum

mln. tons of alumina

bln. of investments over 10 years

№ 1

№ 1

5

8

$ 8

24

Growth Strategy

www.rusal.ru

Phone: +7 495 720 51 70Fax: +7 495 728 49 32