UNITED COMPANY Rusal, the world’s largest aluminium producer by volume, reported a sharp drop in first-quarter net profit as prices for the metal slump and said it might start cutting production later this year.

“The first quarter of 2012 has proved to be a tough test for the aluminium industry with the global demand for the metal slowing down and the aluminium price weakening,” said Oleg Deripaska, Rusal’s chief executive officer and controlling shareholder, yesterday.

Net profit in the three months to March 31st fell 84 per cent to $74 million compared with the same period last year, as the price of aluminium dropped 13 per cent from a year ago.

Its net debt rose 0.7 per cent to $11.1 billion while first-quarter sales fell 3.7 per cent to $2.9 billion. Citing uncertainty, Rusal said it was considering cutting global capacity by 4-6 per cent in the second half of the year. Rusal owns the Aughinish Alumina plant near Foynes, Co Limerick.

Slowing growth in the Chinese economy has prompted the global metals industry to curb costs and put the brakes on expansion.

Mining groups Rio Tinto and BHP Billiton both said recently they would rein in spending plans.

The aluminium sector has struggled with overcapacity even during the recent boom in the commodities market. US producer Alcoa slashed global capacity by 12 per cent at the start of this year, while state-run Aluminum Corp of China reported a net loss of $173 million for the first quarter.

The company said the euro zone crisis and slowdown in Chinese demand were likely to dominate the metal markets. But it said a severe contraction was unlikely because of higher US demand and an expected recovery in Chinese consumption in the second half of the year. – (Copyright The Financial Times Limited 2012)