Alcoa to slash global capacity
New York, January 7, 2012
Alcoa, the largest US producer of aluminium, said it will slash its global smelting capacity by 12 per cent, becoming the first producer to take direct action to cut costs amid a steep drop in metal prices.
The move will result in a restructuring charge in the fourth quarter that will push the US producer into its first loss in nine quarters.
The cuts are likely to help boost prices, which have languished below $2,500 per tonne since August, traders said. Analysts estimate as much as a quarter of the global production is already unprofitable at that level.
But more brutal industry-wide cuts may be needed to allay deeper concerns about a slowdown in demand from key consumer China and a surplus of metal in the US and Europe, traders said.
Unveiling what chief executive and chairman Klaus Kleinfeld described as 'difficult but necessary steps', Alcoa said it will cut output by about 531,000 tonnes per year and slash costs.
Its Tennessee smelter, which was curtailed in 2009, and two of the six idled potlines in Rockdale, Texas will be permanently closed to reduce global smelting capacity by 291,000 tonnes per year, or 7 per cent.
A further 240,000 tonnes, or 5pc, will be curtailed elsewhere, it added, without saying how many other plants or how many employees were affected.
Alumina output will be reduced to reflect the smelting curtailments as well as prevailing market conditions, it said.
While the news pushed Alcoa's shares down 17 cents to $9.19 in after-hours trading, traders expected London Metal Exchange prices to rise on the much-anticipated news.-Reuters