Smelter shutdown

Alcoa will curtail aluminium production at its 61 percent-owned Eastalco aluminium smelter because it has not been able to secure a new, competitive power supply for the facility.


Alcoa announced it will curtail aluminium production at its 61 percent-owned Eastalco aluminium smelter in Frederick, Maryland on December 19, 2005 because it has not been able to secure a new, competitive power supply for the facility.



Alcoa’s cost of curtailment, approximately $14 million pre-tax, will be included in the company’s fourth quarter 2005 results.



Alcoa issued possible lay-off notices to approximately 600 employees in October, saying a curtailment was possible if a new power arrangement was not achieved soon.



Approximately 100 employees will continue to be employed while the plant is prepared for curtailment, but that will drop to approximately 25 employees over time for site holding and maintenance activities. Alcoa will also continue to homogenise, cut to length, and distribute billet cast at other Alcoa locations using Eastalco’s existing equipment, maintaining billet capacity to serve customers.



While the smelter is curtailed, the company will continue to work with government and local officials to seek ways to secure a competitively priced, long-term power supply for the 195,000 metric ton per year (mtpy) smelter.



Eastalco has been operating under a power arrangement from Allegheny Power that will expire on December 31, 2005, following notification by Allegheny.



The current rates paid by Eastalco are approximately 40 percent higher than the global smelting average paid for electricity.



Discussions with power providers in the Pennsylvania, New Jersey and Maryland (PJM) market area, which services Eastalco, are suggesting retail market rates that would increase Eastalco’s rates to more than three times the global average.