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UPDATE 1-Alcoa idling 3 U.S. aluminum smelters as prices bite
November 3, 2015 / 12:27 AM / 2 years ago

UPDATE 1-Alcoa idling 3 U.S. aluminum smelters as prices bite

(Adds details on plant closures, CEO comment, market background)

NEW YORK, Nov 2 (Reuters) - Alcoa Inc said on Monday it will idle three of its four active U.S. aluminum smelters, slashing annual capacity by 500,000 tonnes, in the steepest cuts yet by an aluminum producer to battle oversupply and sinking metal prices.

The company said in a statement it will suspend its Intalco and Wenatchee smelters in Washington state and the Massena West smelter in New York state. It will also permanently close Massena East, also in New York, which was shuttered in 2014.

The move will reduce Alcoa’s smelting capacity by a further 503,000 tonnes annually, leaving the Evansville, Indiana, smelter as its sole U.S. primary plant. It produces 269,000 tonnes per year.

For Alcoa, the measures come as it prepares to break itself in two, separating the faster-growing plane and car parts business from traditional upstream operations.

The cuts are the biggest since the year-long rout in benchmark aluminum prices and the collapse in premiums, paid for physical delivery, earlier this year, pushing many of the world’s smelters into the red.

Prices have plunged by a third since September 2014 and are languishing at six-year lows around $1,450 per tonne amid concerns about waning demand and a ballooning surplus.

Some producers, like Century Aluminum Co, also blame exports of cheap metal from China, the world’s top producer, for undermining their competitiveness.

Traders said the cuts were a step in the right direction to chip away at the global surplus and may give U.S. premiums AL-PREM some support.

“These difficult, but necessary measures will further strengthen our upstream portfolio, reducing our cost position and driving greater resilience,” Klaus Kleinfeld, chairman and chief executive, said in the statement.

The news deals a major blow to a U.S. industry struggling with high energy and labor costs. Many companies including Alcoa have built capacity in the Middle East where energy is cheap and abundant.

Alcoa’s cuts, coupled with recent announcements by Century, represent around 30 percent of U.S. aluminum production and will leave just four smelters operating in the United States, with capacity to produce 759,600 tonnes per year.

That’s the lowest output since the 1950s and compares with 23 smelters in 2000, according to the U.S. Geological Survey.

Alcoa said it will begin the cuts later in the fourth quarter, and will aim to complete them by the end of the first quarter of 2016.

Reporting by Luc Cohen; Editing by Leslie Adler

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