BUSINESS

Aluminum giant Alcoa won't say if Canada part of plans to cut smelting capacity

01/05/2012 05:52 EST | Updated 03/06/2012 05:12 EST
MONTREAL - U.S. aluminum giant Alcoa Inc. won't say if Canada figures in its plans to curtail another five per cent of its global smelting capacity as the company cuts costs in the face of weak prices.

The company said late Thursday it will reduce capacity by another 240,000 tonnes a year to 4.5 million tonnes.

Details will be announced when the plans are completed, spokesman Mike Belwood said from New York.

"We are looking at capacity curtailments, but at this point we are not in a position to be specific on where that curtailment will take place."

Alcoa (NYSE:AA) also announced Thursday it would permanently remove 290,000 tonnes by closing the smelter in Alcoa, Tenn and shut down two of six idle metal production lines in Rockdale, Tex.

The operations had employed more than 1,100 workers in 2009, when they were idled. Nearly as many remain working at the rolling and recycling mills at the sites.

The plan to remove a total of 531,000 tonnes will reduce Alcoa's global smelting capacity by about 12 per cent.

Aluminum prices have fallen by about one-fourth since April because of weak demand in construction, slower growth in China and uncertainty about the direction of Europe's economy.

Even if the capacity curtailments affect Canada, it won't affect Alcoa's plans to spend billions of dollars in upgrades, added Belwood.

The aluminum giant approved in November 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.

As well, $600 million will spent on equipment maintenance and the installation of new smelting ovens.

The plan will increase production capacity by 120,000 tonnes per year and reduce greenhouse gas emissions.

The Quebec government has given Alcoa about 325 megawatts of electricity at a preferential rate but 50 megawatts less than initially agreed upon.

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.

Montreal-based Alcoa Canada also operates processing plants for the aerospace, automobile and construction industries, mainly in Quebec and Ontario.

The metals producer did not say how many workers in its 61,000-employee global workforce would be affected by the cuts.

"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 chairman and CEO Klaus Kleinfeld.

The company said the cuts will be completed in the first half of this year and will cost the company about US$155 million and US$165 million after tax on its books, about 60 per cent of which are non cash charges.

Meanwhile, Rio Tinto Alcan (NYSE:RIO) said it has no plans to further reduce its aluminum production.

One-third of its 438,000 tonnes of aluminum production capacity in Alma, Que., has been cut because of the lockout of some 800 workers over a labour dispute.

A mechanical incident Dec. 29 also reduced production in Shawinigan, Que., by half to 50,000 tonnes.

Spokesman Bryan Tucker said officials are investigating what caused a circuit breaker to fail that caused two of four potlines to go down. Since the plant is slated to close by 2015, the repairs may not be completed.

"That's a possibility just like it's possible that we start it back up but that decision hasn't been made yet."

Alcoa shares fell nine cents to close at US$9.36 on the New York Stock Exchange. In extended trading, they were down another 14 cents, at $9.22.