Aluminum industry leader Alcoa said on Thursday it was reducing its global smelting capacity by 12 percent, citing the need to become more competitive.
“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,” the company said in a statement.
“Together, these closures will reduce Alcoa’s global smelting capacity of 4.5 million metric tonnes per year by 291,000 tonnes, or about 7 percent,” it said.
“The curtailments, to be announced in the near future, will reduce Alcoa’s global smelting capacity by an additional 240,000 tonnes, or about 5 percent,” it added.
The company said no jobs would be lost as a result of the move.
Alcoa has seen its earnings hit by lower metal prices as the European economy has stumbled.
Alcoa said its net income for the three months to Sept. 30 was US$172 million on sales of US$6.4 billion, compared with earnings of just US$61 million on US$5.3 billion in sales for the year-earlier quarter.
However, lower aluminum prices meant the quarter’s net profit was nearly half of the previous quarter’s US$322 million, while total sales were only down 2.5 percent, the company said.
“The closures highlight one of Alcoa’s pressing issues, that of owning old smelters with high cash costs; although refurbished, the Alcoa smelter was commissioned in 1914 and Rockdale dates to 1952,” analysts at BMO Capital Markets said.
“Given BMO Research and consensus forecasts for the [fourth quarter] profit release due Monday, Jan. 9, Alcoa’s headline earnings will now almost certainly be negative,” they said.
Alcoa shares fell 1.7 percent to US$9.20 at 6:37pm in after-hours trading in New York on Thursday. The stock slumped 44 percent last year, the second-biggest decline in the Dow Jones Industrial Average.
The possibility of similar output cuts re-emerged in the final months of last year as the aluminum price declined again. Oleg Deripaska, chief executive of Rusal, the world’s largest producer, said last month that falling prices may force 3 million tonnes of capacity to be closed or mothballed.
Rio Tinto Group, the world’s third-largest producer, said in November it would close its Lynemouth smelter in Northumberland, England, because of increasing energy costs. London-based Rio said in October it would sell 13 aluminum assets to improve its financial performance.
Norsk Hydro, Europe’s third-biggest producer, said in October that it had no plans to restart the 26 percent of its capacity that was shuttered in 2009.