) announced that it will shut down or curtail 164,000 metric tons
of smelting capacity in the U.S and Brazil as part of its
smelting capacity review. Alcoa is taking this step to maintain
its competitiveness as aluminum prices have declined to four-year
Alcoa announced that it will temporarily cut production at its
aluminum smelters in Brazil and will permanently close a potline
at the Massena East plant in New York. The current capacity of
its smelters in Brazil represent 124,000 metric tons while that
in New York represents 40,000 metric tons. Alcoa expects to
complete the shut down and curtailments by the end of Sept.
The closure and curtailments are as per Alcoa's announcements
made in May where the company stated that it will review 460,000
metric tons of smelting capacity over the next 15 months for
potential curtailment. Of 460,000 metric tons, the company has
closed or curtailed 269,000 metric tons of capacity. This
includes permanent closure of 105,000 metric tons of capacity
announced earlier at Alcoa's Baie-Comeau smelter in Canada.
In addition to this, Alcoa also permanently closed its Fusina
primary aluminum smelter in Italy. The closure of the facility
reduced Alcoa's global smelting capacity of 4.2 million metric
tons per year by 44,000 metric tons. The closure was not a part
of the review that the company announced in May.
As a result of these actions Alcoa expects to incur total
restructuring-related charges of between $5 and $10 million
(after-tax), or a penny per share, of which, roughly 50% is
non-cash, in the third quarter of 2013.
Alcoa's strategy of curtailments is consistent with its
previously announced 2015 goal of lowering its position on the
world aluminum production cost curve by 10 percentage points and
the alumina cost curve by 7 percentage points.
Alcoa remains on track to move down the cost curve and
curtailed capacities in its upstream business. The curtailments
will improve the competitiveness of the company's Primary
Alcoa, a prominent player in the mining industry along with
Aluminum Corporation of China Limited
Atlatsa Resources Corporation
BHP Billiton Limited
), is a world leader in production and management of primary
aluminum, fabricated aluminum, and alumina. The company is also
the world's largest miner of bauxite and refiner of alumina.
Alcoa is divesting underperforming assets through its
restructuring program and is aggressively pursuing cost-cutting
actions. Healthy demand in the aerospace market is expected to
drive results going forward.
However, weakness remains in the commercial building and
construction market. In addition, the company continues to
contend with pricing pressure.
Alcoa currently retains a short-term Zacks Rank #4 (Sell).
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