Lenders to Russian aluminium giant Rusal have agreed not to take action against it on any defaults for up to three months, while it continues talks to revise terms on up to $5.15 billion in debt.

The news came as rival Alcoa forecast that global aluminium demand will exceed production this year.

The debt renegotiation is crucial for United Company Rusal, the world‘s largest aluminium producer, as aluminium prices remain near 4½ year lows.The company reported its second annual loss in a row in March – $3.2 billion.

Other aluminium producers are also suffering. Rio Tinto has taken a $1.3 billion writedown on its aluminium business while Alcoa is among aluminum producers outside China to have shuttered unprofitable smelters amid a glut of the metal. The company yesterday reported better- than-expected first quarter earnings and said it now sees a global supply deficit of 730,000 metric tons. In January it had predicted a 106,000-ton surplus.

There have been nine years of excess global production, according to data compiled by Bloomberg, with Chinese output tripling in the period. Aluminium futures slumped in February to the lowest in more than four years.

Rusal said it is continuing to seek agreement from its lenders to defer repayment dates and revise covenants on up to $4.75 billion of syndicated facilities and $400 million of syndicated facilities that would be combined into a single facility agreement.

A majority of lenders has agreed to hold off taking any steps to start insolvency proceedings against the company until July 7th or until an amended agreement is reached, if it fails to repay instalments, Rusal said in a filing to the Hong Kong bourse.

The company, saddled with $10.1 billion in net debt, said it will continue to pay any and all accrued interest on loans outstanding. – (Reuters / Bloomberg )