Alcoa plan for facility overseas worrisome

MASSENA — As Alcoa Inc. and its partners move forward with plans to build the world's lowest-cost aluminum production facility in Saudi Arabia, union members worry that such large overseas investments could threaten the future of the company's facilities here.

But an Alcoa official says the Middle East project is not at odds with the north country's own pending $600 million modernization of Alcoa's Massena East facility.

In a 30-year power contract signed with the New York Power Authority in early 2009, Alcoa pledged to invest $600 million to modernize the East plant before the current power contract expires in 2013. Alcoa says it employs 1,300 in Massena.

Unfavorable economic conditions last spring led NYPA to grant Alcoa flexibility in moving the modernization project forward, suspending deadlines for investments and job retention requirements laid out in the 2009 agreement and allowing the East plant to be idled temporarily. At the time, Alcoa had seen a huge drop in the price of aluminum and overall poor market conditions, prompting the company to curtail 20 percent of its worldwide production.

In December, Alcoa announced a joint venture with Saudi Arabian mining company Ma'aden to build a fully integrated industrial aluminum complex in Raz Az Zawr, an industrial zone on the east coast of the Kingdom of Saudi Arabia.

The proposed $10.8 billion complex would be able to handle every step of aluminum production: mining the bauxite, refining bauxite into alumina, combining alumina and other raw ingredients used in the smelting process to create aluminum and then rolling, pouring and molding that aluminum into stock products to be sold into the market. And it would do all of this more cheaply than any other facility in the world, a company news release said.

United Steelworkers Local 450 President Christopher W. Baldwin said the December announcement raised concerns among many of his members at the West plant and idled workers at the East plant.

Last week, officials with Ma'aden announced contracts had been awarded to three major companies for the project. The fact that the project is still moving forward while the Massena East facility is still closed worries Mr. Baldwin.

"They didn't hesitate very long to invest that money," he said.

When the project was first announced, the Ma'aden smelter had a proposed capacity of 740,000 metric tons per year. But more recent reports put the capacity at more than 2 million metric tons per year.

"The whole United States, if you include everybody — Alcoa, Century Aluminum, Rio Tinto — the whole smelting capacity of the U.S. is 3.1 million metric tons per year," Mr. Baldwin said. "With what they have curtailed in the U.S., that's running about 1.6 million metric tons per year right now."

Such smelters as the Massena East and West plants perform the third of the four functions the Ma'aden complex would perform — combining raw materials in smelting pots, where huge amounts of electricity are used to make molten aluminum through electrolysis. One of the largest costs in this process is electricity. When both Massena plants are running, the company has a contract to purchase 478 megawatts of low-cost hydropower from the New York Power Authority — power that has been touted as some of the cheapest in the world.

But Massena's alumina must be shipped from Suriname, in northern South America, which adds the cost of transporting the raw material to the cost of producing aluminum.

"If people here aren't worried about it, they should be." Mr. Baldwin said.

Wesley N. Oberholzer, the primary metals plant manager for Alcoa's Massena operation, said he feels differently.

In an interview earlier this year, Mr. Oberholzer said Alcoa's investment in the Ma'aden project has not jeopardized Massena's chances of getting the modernization project approved or of continuing to operate here.

"I understand some people view Ma'aden as a threat or they're asking, 'How can Alcoa be doing that and not be committed to our project?'" Mr. Oberholzer said. "Massena's money did not go to the Middle East. We're still part of Alcoa's long-term plans and that's why Alcoa continues to be committed to the investment that we've committed to up here. It's not Ma'aden or Massena; it's Ma'aden and Massena."