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Rio to run Shawinigan plant as it explores sale

Aug 20, 2013 | 05:53 PM | Michael Cowden

Tags  Rio Tinto Alcan, aluminum, casthouse, Shawinigan, billet, smelter, remelt, sale Michael Cowden

CHICAGO — Rio Tinto Alcan Inc. plans to continue operating its casthouse in Shawinigan, Quebec, through 2014 even as talks are already under way with potential buyers for the facility, sources familiar with the matter told AMM.

The Shawinigan casthouse, which makes small-diameter billet not readily available elsewhere, will maintain operations despite the Montreal-based aluminum producer announcing that its Shawinigan smelter will be shut down (, Aug. 7), market sources said.

The Rio Tinto Alcan release on the Shawinigan smelter closure did not mention the casthouse, and the compnay and its London-based parent, Rio Tinto Plc, did not respond to requests for comment.

It is unclear who will operate the Shawinigan casthouse in 2015 and beyond, market sources said. But Rio Tinto Alcan is exploring several options, including a potential sale to a company that would operate the casthouse while Rio Tinto would continue to market product from the facility, they said.

Several interested parties are already in talks with Rio Tinto Alcan, market sources said, but they declined to reveal those potential buyers. Shawinigan has a good probability of being acquired and continuing to operate because of the strong premiums that can be fetched for smaller-diameter niche product, they said.

But there will be one big change at the Shawinigan casthouse: instead of receiving liquid metal from a smelter, the facility will operate as a remelter, something that will slow and reduce output to some extent, market sources said. But most Shawinigan casthouse customers will continue to be served either from Shawinigan or, if they purchase less niche items, from other Rio Tinto Alcan operations, they said.

Rio Tinto Alcan is probably not interested in holding the Shawinigan casthouse beyond 2015 because a niche remelter operation likely would be considered a noncore operation, market sources said, noting that Rio Tinto is looking to divest noncore operations.

Estimates for Shawinigan casthouse employees ranged from 60 to 80 people, they said. The facility is akin to a "microbrewery" in the billet world, according to one market source.

While other billet production facilities may produce 5 to 7 diameters between 7 and 12 inches, the Shawinigan casthouse produces as many as 30 diameters between about 3 and 10 inches, with many focused on the smaller end of the spectrum, market sources said. In some cases molds are specific to customers and applications, a situation roughly akin to a die caster having an extrusion die for an individual client.

Key markets for the products from the Shawinigan casthouse include hot and cold forgings as well as small-diameter billet used to make aluminum oxygen tanks and small propane tanks, market sources said. Oxygen tanks and propane tanks may also be made from steel, but when portability is an issue, aluminum tends to be the preferred material, they said.

Rio Tinto Alcan has called, met with and assured most Shawinigan casthouse customers that they will continue to receive metal from the company, market sources said. But a handful of customers will no longer be able to source material from the operation, they acknowledged.

Some smaller sizes may not be available in North America, market sources said. Customers unable to secure metals from the Shawinigan casthouse may look abroad for alternate suppliers, machine other billet sizes—something that could prove expensive—or extrude smaller rods, which may not work for all applications, they said.

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