Alcoa Says Refinery Expansion on Hold After Extension

Alcoa Inc. (AA)’s plan to expand an alumina refinery in Western Australia remains on hold because of unfavorable economic conditions, the largest U.S. aluminum producer said after gaining approval to increase capacity.

Alcoa received a five-year extension of an approval for the expansion of the Wagerup refinery, the Western Australia state government said in a statement today. The earlier five-year permit expired in October.

“The extension gives Alcoa the opportunity to continue evaluating market conditions and construction costs,” Alcoa’s Australian unit said in an e-mailed response today. “The project remains on hold because of the challenging economic environment and the need to obtain competitive and secure energy supplies in Western Australia.”

Aluminum prices in London have declined 21 percent in the past year as a slowing global economy curbed demand. Alcoa cut 12 percent of capacity in January and Chief Executive Officer Klaus Kleinfeld said April 11 the reductions “may not be the end.”

The Wagerup refinery can produce 2.6 million metric tons of alumina annually, Alcoa said on its website. Subject to stringent environmental conditions, an expansion will enable as much as 4.7 million tons a year to be produced, the Western Australia state government said.

Alcoa suspended its proposed expansion of the refinery in November 2008 after the global credit crisis curbed demand.

To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net