Alcoa to cut production by mid-year, Jamaican impact unclear
Published:Sunday | January 8, 2012 | 12:00 AM
Alcoa said Thursday that it would cut production capacity worldwide but there is yet no indication that Jamaica is to be affected.
The American company plans to "close down or curtail" 531,000 metric tonnes of smelting capacity, which includes shutting down one plant in Tennessee and idling two of six lines in Rockdale, Texas.
"There have been no requests to the Jamaican partners regarding the operations here," said a government source on Friday. However, the source said they were awaiting further developments.
Jamaica refines alumina used in the production of aluminium. Alcoa also plans to make cuts in that segment, saying its "alumina production will be reduced across the global refining system to reflect the final curtailments in smelting as well as prevailing market conditions".
The American company is a partner with the Government of Jamaica through Clarendon Alumina Partners (CAP) in Jamalco, which refines alumina. Alcoa owns 55 per cent of the 1.4 million tonne-capacity operation. CAP is in the process of selling its stake, reportedly to Glencore, which would then own the other 45 per cent of Jamalco.
cost-cutting measure
Alcoa's restructuring is a cost-cutting measure made necessary by falling aluminum prices, which have declined by more than 27 per cent from their peak in 2011, the company said. The metal is currently trading above US$2,500 per tonne.
Alcoa has said it would be making another announcement on the markets to be affected by curtailments, which will reduce smelting capacity by 240,000 tonnes, or five per cent.
The decommissioning of the plant in Tennessee and the scaling back in Texas will take 291,000 tonnes, or seven per cent of capacity offline. The Tennessee shutdown is permanent, the company said.
Alcoa's global smelting capacity is currently at 4.5 million tonnes. The combined 12 per cent reduction takes system capacity to just below four million tonnes. The cuts are to happen by mid-year.
"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 in a statement.
The company says it wants to lower its position on the global aluminium cost curve.
In addition to the curtailments, Alcoa said it would "accelerate actions to reduce the escalating cost of raw materials".
The company expects to book charges of US$155 million to US$165 million after tax - 60 per cent of which would be non-cash - from the restructuring. Its quarterly financials are due for release on Monday.