Alcoa to cease smelter production

Alcoa, an aluminium company, has announced that it will temporarily cease production of its two aluminium smelters in Fusina and Portovesme, Italy.

The decision is the result of a European Commission (EC) ruling stating that the extension of Italy’s existing electricity tariff after 2005 does not comply with European Union (EU) state-aid rules and that a portion of the benefit received by Alcoa must be refunded.

The company is appealing the decision. However, it said that, while uncertainty over obtaining future power supply for the smelters at competitive rates remains, the production of its smelters will be temporarily curtailed, affecting 2,000 direct and indirect jobs.

The process to shut down the smelter has already begun and is due to be completed by the second half of December. Alcoa’s rolling mill in Fusina, which is adjacent to the smelter, will not be directly affected by this action.

Klaus Kleinfeld, the company’s president and chief executive officer, said: ‘This is a dark day for European heavy industry. The EC is sending a signal to investors and workers that heavy industry is no longer a priority. Particularly in today’s economic crisis, this decision is hard to understand. Skilled and long-term jobs will be lost, facilities will be closed and companies in Europe will not be able to compete.’

Kleinfeld added that the decision would make the European aluminium industry less competitive in the worldwide markets and contribute to shutting down Italian aluminium production.

‘It is a terrible outcome for Italy,’ said Marcos Ramos, president of Alcoa Primary Products Europe. ‘This EC decision will result in approximately 2,000 direct and indirect jobs being lost in Italy, not to mention the impact on the communities of Fusina and Portovesme. We will continue to use every lever in an attempt to gain access to competitive power so that we can get our people back to work.’

The curtailments bring Alcoa’s total global smelting system idling to around 24 per cent. The company said it anticipates to take a fourth-quarter-of-2009 charge of between $300m (£180m) and $500m before tax.