The decision is aligned with the company’s recent announcement to evaluate upstream capacity for possible curtailment, closure or sale as Alcoa further optimises its commodity portfolio. The curtailment is expected to be complete by April 15, 2015.
“We continue to take decisive steps to create a globally competitive commodity business and are executing against our upstream capacity review,” said Bob Wilt, President of Alcoa’s Global Primary Products. “These are difficult but necessary actions in support of Alcoa’s strategy to lower the cost base of our upstream businesses.”
This curtailment adds to the 85,000 metric tons of capacity idled at São Luís in May 2014 and the 12,000 metric tons curtailed in October 2014. Challenging global market conditions in primary aluminium production and increased costs have made the smelter uncompetitive. The refinery at São Luís is unaffected and will continue normal operations.
“We understand how deeply this decision affects our employees, our contractors and our communities,” said José A. Drummond, President of Alcoa Latin America. “Our teams have worked extremely hard to make the plant competitive, and we will actively consult with our employees, unions and community stakeholders to minimise the impact of this action. We will continue working to achieve the competitive conditions necessary for aluminium production in the region.”
The curtailment is in line with Alcoa’s announcement on March 6, 2015 to evaluate 500,000 metric tons of smelting capacity and 2.8 million metric tons of refining capacity for possible curtailment, closure or sale. Once the São Luís facility is curtailed, Alcoa will have approximately 740,000 metric tons, or 21%, of its smelting capacity offline.
As a result of the announcement, Alcoa will record a restructuring-related charge in the first quarter expected to be between $10 million and $15 million after-tax, or $0.01 per share.
By curtailing high-cost smelting and refining capacity, Alcoa supports its goal of lowering its position on the global aluminium cost curve to the 38th percentile and the global alumina cost curve to the 21st percentile, by 2016.