Oleg Deripaska said that the Russian government should buy metals as the world recession saps demand
Oleg Deripaska, the billionaire owner of the world’s biggest aluminum producer United Co. Rusal, said Russia’s government should buy metals as the world recession saps demand, absorbing stockpiles that may cripple economic growth.
“We will not need to use at full scale the production capacity we have at present, be it steel, copper, nickel or zinc,” Deripaska said in an interview in Lima, Peru, where he accompanied Russian President Dmitry Medvedev to the Asia-Pacific Economic Cooperation forum. “We have to clear that heap of excess waste that has accumulated. It will bottleneck the economy until we use it up.’’
Russia, the world’s biggest supplier of natural gas, nickel and aluminum, faces rising unemployment as plunging commodity prices slash export earnings. An economy that’s expanded at 7.1 percent a year since 2001 may slow to 2 percent next year, Arkady Dvorkovich, Medvedev’s economic aide, said last week.
The government should counteract the slide in demand by stocking up on raw materials at bargain prices, Deripaska said. The state should then use its purchases to build pipelines, bridges, housing and schools, revitalizing the nation’s crumbling infrastructure and removing stockpiles that are braking growth, he said.
Demand for Russian oil, metals and agriculture products will drop next year as the global crisis peaks, Finance Minister Alexei Kudrin said last week. Russia recently approved plans to spend 13.5 trillion rubles ($491 billion) through 2015 to develop transportation.
“We have to live modestly for the next two years, helping the state to use resources in a more efficient way,’’ Deripaska said Nov. 22. “Our task is waste reduction.’’
Russia has pledged more than $200 billion for measures to battle the country’s worst financial crisis since 1998, including $50 billion for companies that have debts with lenders abroad.
Nickel has plunged 62 percent this year and aluminum is down 27 percent this year as auto plant shutdowns suggested global demand for industrial metals will continue to slow.
OAO GMK Norilsk Nickel, in which Rusal owns a 25 percent stake, said Nov. 20 it will sell some of its output to the government and receive other forms of state assistance.
Deripaska, Russia’s richest man, ceded stakes in Hochtief AG and Magna International Inc. last month after shares used as collateral to finance the acquisitions lost their value. Rusal used its shares in Norilsk, the world’s biggest nickel and palladium producer, as collateral for a $4.5 billion loan from Russian state bailout bank Vnesheconombank this month.
“The crisis won’t last long,” he said. “There is a crisis of overcapacity in production that each country will have to deal with. We can expect a decrease in production capacity by between 20 and 50 percent globally and I am afraid Russia will see some of it too.”
‘Wake From Shock’
Russia is in a better position than more developed countries in Europe and the U.S. where cheap loans were vital to generating demand, Deripaska told reporters later the same day. Russian consumers will “wake up from the global shock’’ faster than Western consumers, he said.
Russians will still need to buy cars and apartments, making for a faster “rebound from the bottom,’’ he said.
“We see how the global car industry expanded capacity over the past five years in China, India, Brazil, Turkey, Mexico, and look, now they have been left without orders,’’ Deripaska said. “I think demand in the first quarter will be 25 percent of what it was in the first quarter of 2007. In Russia, there are about 125 cars per 1,000 people and half of them are like museum items.’’
Deripaska said he isn’t focusing on adding assets to his holdings, which also include construction, aircraft and car production, banking, mining and agriculture.