Alcoa has announced that it will curtail its San Ciprián aluminium smelter in Spain and initiate a collective dismissal that will affect approximately 530 employees.
On October 8, Alcoa made the decision after considering all options, including reviewing records associated with four months of consultations with the workers’ representatives and the negotiations during a potential sale process. On September 29, 2020, Alcoa announced that the Company would take up to 15 days to determine and announce a decision regarding the smelter’s 228,000 metric tons of annual capacity.
The smelter’s curtailment is expected to be complete in the first quarter of 2021, and approximately 100 employees will remain to operate a portion of the casthouse.
“As we’ve shared with our stakeholders throughout this process, the unfortunate reality is that the San Ciprián smelter is uncompetitive, and we do not expect its significant structural issues to change,” said Alcoa President and CEO Roy Harvey. “While we have explored several options in the past months, curtailment is necessary to stop the continuing economic losses. We understand that this is a difficult outcome, and we are committed to minimising the impacts on our employees as we work together to safely curtail the site and continue to meet all regulations.”
Continued operation of the smelter is not viable due to permanent factors such as an uncompetitive energy framework in Spain, global overcapacity in aluminium production and depressed prices. Year to date, the aluminium plant incurred a net loss of approximately $45 million through September 30. In 2018 and 2019, the aluminium plant had combined net losses of $126 million.
Alcoa will offer severance packages and employment services for those affected by the curtailment decision. Associated with today’s announcement, Alcoa expects restructuring charges of approximately $35 million to $40 million (pre- and after-tax), or $0.19 to $0.22 per share, in the fourth quarter of 2020 for employee-related costs, which are all cash-based charges expected to be paid primarily in the first half of 2021. Alcoa notes that the workers’ representatives have previously stated publicly that they intend to challenge the collective dismissal in a legal proceeding. Should this occur, Alcoa will defend its actions, but the timing and amount of the charges could be impacted.
The alumina refinery at San Ciprián was not included in the consultation process and will continue to operate.