April 18 (Bloomberg) -- Alcan Inc., the world's second- largest aluminum producer, said it may close a smelter in France because of higher electricity prices and the euro's gain against the dollar.

The Lannemezan smelter can produce 50,000 metric tons of aluminum a year, 1.4 percent of Montreal-based Alcan's total capacity. Richard Evans, Alcan executive vice president, denied a Financial Times report that the company also might close smelters in the Netherlands and Switzerland.

``These three smelters are challenged and threatened but we are working on solutions,'' Evans, who was cited in the FT article, said today in a telephone interview from Montreal. ``We didn't say we will be closing them.''

Higher prices for oil, coal and natural gas are pushing up electricity prices that London-based CRU estimates account for 29 percent of costs at Western European smelters. The euro's 47 percent gain against the dollar in the past three years has cut profits from aluminum sales in dollars.

Alcan produces about 1.2 million tons a year of aluminum at 11 European smelters, almost a third of its total capacity of 3.45 million tons, according to information on the company's Web site. Most of the smelters are profitable because energy contracts locked in lower prices, Evans said.

Power Prices

Lannemezan's production technology isn't as clean as the others, and its power contract expires next year, he said. The Vlissingen smelter in the Netherlands, which can produce 170,000 tons of aluminum a year, is more modern than Lannemezan, Evans said. Steg, in Switzerland, a 40,000-ton smelter, has years to go on its power contract, he said.

``The most important strategy is to secure long-term competitive energy prices and make them more energy efficient,'' Evans said.

Alcan shares were up 35 Canadian cents, or 0.8 percent, at C$42.79 at 12:30 p.m. Montreal time. They have fallen 19 percent this year, valuing the company at C$15.8 billion ($12.7 billion). Pittsburgh-based Alcoa Inc. is the world's largest aluminum producer.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net.

Last Updated: April 18, 2005 12:46 EDT