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High-cost sites have no place at Rio Tinto: Côté

Keywords: Tags  Jacynthe Cote, Rio Tinto Alcan, aluminum, Sebree

NEW YORK — Rio Tinto Alcan could exit more smelting capacity if it is unable to secure new power contracts for its high-cost smelters, chief executive officer Jacynthe Côté said in an on-stage interview at the 2nd Annual Aluminum Summit in New York, hosted by AMM.

"We’re flagging to the market: We have two plants ending power contracts in 2014, one in Saint-Jean-de-Maurienne (France) and one in (Husnes) Norway," Côté said. "If a (competitive) electricity contract cannot be provided, (there’s) a risk of shutting down."

A spokesman for the company told AMM after the event that only the Saint-Jean-de-Maurienne smelter would be considered for closure at this time.

Côté’s comments fall in line with the aluminum producer’s companywide cost-cutting initiatives: The Montreal-based company announced in October it would divest 13 aluminum and alumina assets in North America, Europe, New Zealand and Australia as it looks to move down the cost curve (AMM, Oct. 17).

Rio Tinto Alcan is close to completing the sale of three of its alumina assets in France and one in Germany as part of that plan, Côté told attendees at the summit. "We hope to close a deal in the coming months," Côté said.

The company is also hoping to close on the sale of a power station in Lynemouth, England, which previously supplied its 182,000-tonne-per-year smelter in the region.

The one asset on the auction block in the United States, the 199,000-tonne-per-year Sebree smelter in Kentucky, is not as close to finding a new owner, Côté said. "We’re not in any rush. We’ll see how the markets keep evolving," she told the audience.

As for the Australian assets included in the divestment plan, Rio Tinto Alcan is still considering either a sale or a spinoff. "We haven’t excluded any option," Côté said.

Rio Tinto Alcan is not alone in announcing smelting capacity curtailments. United Co. Rusal said earlier this year it would consider idling 600,000 tonnes of output in the second half of the year (AMM, May 15), while Alcoa Inc. has announced some 531,000 tonnes of curtailments of its own (AMM, Jan. 6).

"We’ve done our part," Côté said, pointing to earlier closures at Lynemouth; Anglesey, United Kingdom; and Beauharnois, Quebec. "For us, it’s a question of whether or not the assets are in positive cash flow."

In addition to capacity issues, another key topic heating up the discussion at the Aluminum Summit was the long wait times at London Metal Exchange-approved warehouses in Detroit.

Consumers in need of metal are now waiting as long as nine months to a year for their pickup slot, sources said, raising concerns about aluminum’s physical availability.

According to Côté, Rio Tinto Alcan is not a major player in that part of the market, with the majority of Rio Tinto Alcan’s aluminum sold directly to customers.

"Two-thirds of our material has a name and address and goes straight to the customer," Côté said. "We’re always opportunistically looking at what our customers need more of."

A portion does go to traders, however, so some of the company’s aluminum may also make its way to LME-listed warehouses, Côté said.

"It’s not always evident . . . where it ends. Some may go into warehouses, some may go to the direct customer, some may go to traders. Am I sure none of it is going to warehouses? No."

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