Alcoa cutting global smelting capacity by 12 per cent

Aluminum giant Alcoa intends to close or curtail approximately 531,000 metric tons, or 12 per cent of its global smelting capacity. The Company will permanently close its smelter in Alcoa, Tennessee, which was curtailed in 2009, along with two of the six idled potlines at its Rockdale, Texas smelter. Together, these closures will reduce Alcoa’s global smelting capacity of 4.5 million metric tons per year by 291,000 metric tons, or about 7 per cent.

The curtailments, to be announced in the near future, will reduce Alcoa’s global smelting capacity by an additional 240,000 metric tons, or about 5 percent. It is not clear at this time whether the curtailments will affect operations in Canada. In November the company approved the next phase of a five-year, $2.1-billion investment plan for its trio of smelters in Quebec. The plan will modernize Alcoa's smelter in Baie Comeau, Que., for $1.2 billion with investments of $300 million at its Becancour and Deschambault smelters in the province.

Alcoa Canada employs 3,900 people and has major operations in Quebec, where the company has an annual production capacity of nearly one million tonnes of ingots, castings, billets and aluminum rods.

“These are difficult but necessary steps to improve Alcoa’s competitiveness, preserve and grow shareholder value and protect jobs in the rest of the Alcoa system,” said Alcoa Chairman and CEO Klaus Kleinfeld.

Aluminum prices have fallen more than 27 percent from their peak in 2011. In addition to the curtailments, the Company will accelerate actions to reduce the escalating cost of raw materials.

Kleinfeld added that Alcoa will work with all affected communities to explore ways to redevelop closed facilities and will consult with employees and work unions/councils impacted by curtailments. “We recognize our responsibility to the people and communities of the affected facilities,” he said.

The curtailments are expected to be complete by the first half of 2012. Alcoa’s alumina production will be reduced across the global refining system to reflect the final curtailments in smelting as well as prevailing market conditions. The curtailments will contribute to the Company’s long-term goal of lowering Alcoa’s position on the world aluminum production cost curve by 10 percentage points.

Total restructuring-related charges for fourth quarter 2011, principally composed of the above actions, are expected to be between $155 million and $165 million after-tax, or $0.15 to $0.16 per share, of which approximately 60 percent is non-cash.