Alcoa to Consider Buying BHP Billiton, Rio Tinto Aluminum Assets

Alcoa Inc., the largest U.S. aluminum producer, may buy some assets used to make the metal from BHP Billiton Ltd. and Rio Tinto Group as it expects demand to grow about 6.5 percent a year for the next decade.

“We’re having a look if they’ve got assets that they want to divest,” Alcoa of Australia Ltd. Managing Director Alan Cransberg told reporters today after a presentation in Melbourne, without elaborating. Annual growth of 6.5 percent “is a beautiful number and most in the industry would be happy with that.”

BHP and Rio have either sold or halted development of aluminum projects following a decline in the price of the lightweight metal and a shift in focus toward more profitable commodities. Melbourne-based BHP sold its 33.3 percent stake in an alumina project in Guinea for $1 earlier this month and scrapped plans to build a smelter in the Democratic Republic of Congo.

Aluminum prices have fallen 3.3 percent this year after an 18 percent decline in 2011. Aluminum for three-month delivery traded at $1,952.50 a metric ton on the London Metal Exchange as of 6:07 p.m. in Melbourne.

BHP in January halted bauxite exploration at its Boffa-Santou-Houda site in Guinea, the world’s biggest exporter of the ore that’s used to make aluminum.

Rio has put up for sale 13 aluminum assets, including its Gove operations in Australia, since October last year to improve the group’s financial performance. It has also transferred smelters, mines and alumina plants to a unit called Pacific Aluminum.

‘Growth Opportunity’

Aluminum was Rio’s second-least profitable business unit last year, earning $442 million on sales of $12.2 billion, according to data compiled by Bloomberg.

“If there’s an opportunity that we think we can grow that business and has synergies with our business, we will look at that,” said Cransberg.

Alcoa will stay in the aluminum business because demand will remain strong in the long term, driven by Asia, Cransberg said.

The company also intends to keep its Point Henry smelting operations in Australia’s Victoria state after cutting jobs by 10 percent in June to lower costs, he said. Alcoa of Australia has invested as much as A$200 million on three gas power plants in Western Australia state to secure the company’s long-term need for energy supply, said Cransberg.

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