CHICAGO Alcoa Inc. plans to cut its electricity purchases for its three Québec smelters and could idle production if it doesnt get a better power deal from Canadian public energy utility Hydro-Québec.
The total capacity theoretically in play could be as much as 953,000 tonnes, according to Alcoas website and calculations by AMM.
The move to slash Alcoas power purchases in Québec comes because of a rate increase slated to take effect Jan. 1, 2015, that would significantly boost energy costs and make the companys Québec smelters uncompetitive, the Pittsburgh-based aluminum producer said in an e-mail to AMM Oct. 30.
"There is always a possibility a smelter will curtail without a competitive power rate," an Alcoa spokeswoman said in the e-mail.
The three smelters impacted are in Bécancour, Deschambault and Baie-Comeau, Québec, the spokeswoman said, noting that the facilities employ about 3,000 people.
"A competitive power rate is needed that allows Alcoa to continue to invest in its operations and maintain its important economic impact in Québec," the spokeswoman said. "The rate must be competitive on a global scale and flexible enough to adapt with changing aluminum market conditions."
Alcoa said it plans to gradually reduce power consumption from Nov. 1, 2014, through Dec. 31, 2014.
The increased power rate would cost Alcoa some $220 million annually starting Jan. 1, 2015, the spokeswoman said.
The Baie-Comeau smelter makes T-ingots, rolling ingots, billets and rod and has capacity of 385,000 tonnes per year, according to Alcoas website. But the company in the third quarter closed two potlines at Baie-Comeau representing 105,000 tonnes of capacity (amm.com, Oct. 8).
Alcoas majority owned Aluminerie de Bécancour Inc. (ABI) makes T-ingots, rolling ingots and billets and is capable of producing 413,000 tonnes per year, Alcoas website said.
The Deschambault smelter produces T-ingots and has an annual capacity of 260,000 tonnes, according to the website.
Montréal-based Rio Tinto Alcan Inc., which owns a minority stake in ABI, and the Aluminum Association of Canada have already asked that Québec work to provide cheaper power to the provinces aluminum industry in order for it to expand and remain competitive globally (amm.com, Oct. 4).
Aluminum producers in the United States and Canada have been pushing for lower electricity rates in the wake of low prices for aluminum on the London Metal Exchange.
The cash primary aluminum contract ended the LMEs official session at $1,833 per tonne on Oct. 31, down 13.7 percent from a 2013 high of $2,123 per tonne on Feb. 15.