Alcoa to Close Two Quebec Potlines and Delay New Capacity

Alcoa Inc. (AA), the largest U.S. aluminum producer, is shutting two production lines in Canada and postponing construction of a new line at the plant until 2019 as the metal’s price falls.

The potlines to be shut at the company’s Baie-Comeau smelter represent about 105,000 metric tons of capacity and are among Alcoa’s highest-cost to operate, the New York-based company said today in a statement. Charges related to the closing, to be completed by August, are expected to be 11 cents to 13 cents a share, of which about 30 percent will be recorded in the current quarter, Alcoa said.

The company has responded to falling prices and a supply glut by paring costs at its least-efficient plants. Alcoa said May 1 it’s evaluating about 11 percent, or 460,000 tons, of annual smelting capacity for measures including curtailment or closure by the end of next year. The restructuring announced today is part of that review, it said.

Alcoa reduced smelting capacity by 13 percent in 2012 with cutbacks in Tennessee, Texas, Italy and Spain.

The Baie-Comeau smelter started up in 1957, Alcoa said on its website. The company had planned a $1.2 billion upgrade for the plant, which has annual production capacity of 385,000 metric tons of aluminum.

Alcoa said today it will spend $100 million to modernize the smelter, including $30 million to upgrade the plant’s casthouse to form the metal for automotive customers.

Alcoa is expanding its engineered- and rolled-products divisions, which sell aluminum and aluminum alloys to the automotive, aerospace and energy industries. Chairman and Chief Executive Officer Klaus Kleinfeld is betting that record backlogs at aircraft manufacturers replacing aging jets and carmakers using more aluminum will shift Alcoa’s product mix to higher-profit products.

Aluminum for delivery in three months fell 9.2 percent in the 12 months through yesterday to $1,839.50 a metric ton on the London Metal Exchange.

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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