Inc. wants other aluminum producers to follow its lead in
pruning production capacity as low metal prices have left big
parts of the aluminum industry "under water," according to
"We are very committed
to acting (to reduce production capacity), and I wish that this
would be indicative of every company thats playing in our
industry," Alcoa chairman and chief executive officer Klaus
Kleinfeld said during the Pittsburgh-based aluminum
producers second-quarter earnings conference call July
Alcoa has said it is
mulling cutting up to 460,000 tonnes of smelter capacity over
the next year in response to swooning aluminum tags (
amm.com, May 1). The company has already closed
its previously idled 44,000-tonne-per-year smelter in Fusina,
amm.com, June 28) and has also announced plans to
permanently close two older potlines at its Baie-Comeau smelter
in Quebec and postpone the construction of a new potline by
three years (
amm.com, May 16).
"We would say that
there is around a third (of the primary aluminum industry) ...
thats currently under water, and thats including
the higher premiums," Alcoa executive vice president and chief
financial officer William F. Oplinger said.
metals division recorded a $32-million after-tax operating loss
in the second quarter of 2013 compared with an after-tax
operating loss of $3 million in the year-ago quarter, according
to earnings data released July 8
"Primary metals lost
money in the quarter. Our view is that thats symptomatic
of the entire industry," Oplinger said, noting that its
safe to assume that the 460,000 tonnes Alcoa has under review
is "very close" to break-even or below on a cash-cost basis at
"We will continue to
evaluate anything on a cash basis to determine whether we shut
it down over the next few months at the current price levels,"
"And ... its
also not that difficult to figure out which ones are higher
cost here," Kleinfeld added.
Alcoa has high-cost
capacity in Australia, southern Europe and parts of Brazil,
depending on power prices, Oplinger said.
Still, when prodded by
analysts, Oplinger cautioned that it isnt easy to say
exactly what percentage of Alcoas primary production
could remain profitable, after taxes, if aluminum prices and
premiums were to fall by another few cents.
current Midwest premium is at 12 to 12.25 cents per pound. The
primary aluminum cash contract on the London Metal Exchange
ended the official session at $1,740 per tonne (78.9 cents per
pound) July 9, down 2.9 percent from $1,792.50 per tonne (81.3
cents per pound) July 2 and off 18 percent from a 2013 high of
$2,123 per tonne (96.3 cents per pound) on Feb. 15.
Oplinger said in
prepared remarks during the call that regional premiums have
remained at "high levels" because of strong physical demand for
aluminum. He predicted that production cuts already implemented
and "projections for more" would lead to a tightening of
aluminum supplies, while the alumina sector could see a slight
surplus as smelting curtailments outpace refining capacity
cuts. Still, Oplinger said that the aluminum and alumina
markets were "essentially balanced."