Analysis: Aluminium losing battle against oversupply

Election politics in Russia also have halted at least one planned shutdown.

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Throughout the sector, furthermore, smelters that consider closures are often hampered by long-term contracts to buy power and raw materials.

Companies are losing money on 30 to 40 percent of global output, analysts estimate. Margins have been hammered by five years of surpluses and rising input costs, particularly for power.

Benchmark aluminium prices on the London Metal Exchange have crumbled by a third since hitting a peak in July 2008 of $3,380 per tonne.

Producers including Rio, Alcoa and Norsk Hydro have cut global capacity by around 1.3 million tonnes as prices slumped in the second half of 2011 to reach below $2,000 per tonne, but more cuts are needed to bring the market into balance.

Analysts in a Reuters poll last month expected further market surpluses of 600,000 tonnes this year and 415,000 tonnes in 2013.

Earlier in the week, the head of rival BHP Billtion was even more downbeat, saying the world's largest mining group had halted investment in aluminium and had to review the future of its business.

"There is no sense in letting something hang ... on the balance sheet if it doesn't want to be there," CEO Marius Kloppers said.

"It's something that we've got to review. It's clearly not something that's an issue now, but I do think I have to note the aluminium reductions (in profitability) are structural. It's not a cyclical thing."

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