Alcoa announces additional aluminum production capacity cuts

Alcoa, with headquarters in New York and Pittsburgh, has announced additional measures designed to increase the competitiveness of its Upstream business amid prevailing market conditions. The Midwest transaction aluminum price dropped approximately 30 percent, and the Alumina Price Index fell approximately 40 percent in 2015.

Alcoa will permanently close its 269,000-metric-ton Warrick Operations smelter in Evansville, Indiana, by the end of the first quarter 2016. By the end of the second quarter of 2016, the company will reduce alumina production by 1 million metric tons, which includes curtailing the remaining 810,000 metric tons of refining capacity at its Point Comfort operations in Texas. (Point Comfort is part of the Alcoa World Alumina and Chemicals group of companies, owned 60 percent by Alcoa Inc. and 40 percent by Alumina Ltd.)

The rolling mill and power plant at Warrick Operations will continue to operate, according to Alcoa.

“We recognize how deeply this decision impacts employees, and we are committed to work closely with our employees, unions and community stakeholders to support them through this transition,” Roy Harvey, president of Alcoa’s Global Primary Products, says. “Despite the hard work of employees, these assets are not competitive. We’re confident that these actions are the right ones in face of these challenging market conditions. We are committed to creating a resilient business ready for launch as an independent company in 2016.”

Once the actions announced today and in the fourth quarter of 2015 are implemented, Alcoa says it will have curtailed or closed 812,000 metric tons of smelting capacity and 3.3 million metric tons of refining capacity since its announced review in March 2015 of 500,000 metric tons of smelting capacity and 2.8 million metric tons of refining capacity.

Alcoa forecasts improving supply-demand balances in the alumina and aluminum markets for 2016 and says it is focused on positioning the business for success throughout market cycles. The company adds that it is on target to meet or exceed its 2016 goals of moving to the 38th percentile on the aluminum cost curve and 21st percentile on the alumina cost curve.

As a result of this recent announcement, Alcoa will record an associated charge in the fourth quarter of 2015 of approximately $120 million after tax, or 9 cents per share, of which approximately 45 percent will be noncash. Additional charges in the first quarter of 2016 related to these actions are expected to be between $50 million and $60 million after tax, or 4 cents to 5 cents per share, of which almost 80 percent will be noncash, according to the company.