The curtailments are expected to be complete by the end of May 2014.
In 2013, the company curtailed 34,000 metric tons at Poços and 97,000 metric tons at São Luís. The new curtailments will include the remaining 62,000 metric tons of capacity from the Poços smelter, resulting in a full curtailment of its three potlines. Another 85,000 metric tons will be curtailed at São Luís.
“Across the globe, we are taking measures to curtail high-cost smelting capacity that is not competitive and reshape our cost profile,” said Bob Wilt, President of Alcoa Global Primary Products. “These are difficult but necessary actions in support of Alcoa’s strategy to lower the cost base of our upstream businesses.”
As a result of the smelter curtailment, the Poços refinery will also reduce production accordingly. The mine, aluminium powder plant and casthouse at Poços will continue normal operations, as will the refinery at São Luís. Other Alcoa operations in Brazil are not affected.
“We know how deeply this decision affects our employees, our contractors and our communities,” said Aquilino Paolucci, President of Alcoa Latin America and the Caribbean. “While our teams have worked incredibly hard to make these facilities more competitive, we must take steps regarding our primary metal production in Brazil given the market conditions we are facing. We appreciate the support of governments at all levels, and will actively work in partnership with our employees, unions, and community stakeholders to manage through this transition and minimise the impact.”
In May 2013, Alcoa placed 460,000 metric tons of smelting capacity under review. Once all announced curtailments and closures are complete, Alcoa will have approximately 800,000 metric tons, or 21%, of smelting capacity offline.
Total restructuring-related charges associated with the Brazil curtailments in the first quarter are expected to be between $40 million and $50 million after-tax, or $0.04 to $0.05 per share, of which approximately 30% would be non-cash.
Alcoa’s review of its primary metals operations is consistent with the Company’s goal of lowering its position on the world aluminium production cost curve to the 38th percentile and the alumina cost curve to the 21st percentile, by 2016.