ALUMINA shares fell after Alcoa said this morning it would permanently close or idle 12 per cent of its aluminium smelting capacity, following a year in which economic uncertainty slammed prices for the industrial metal.
The top US aluminium producer said in a statement it would close or curtail 531,000 metric tonnes of smelting capacity, including a permanent shutdown of the Alcoa, Tennessee, smelter idled in 2009. The company will also permanently shut portions of its idled facility in Rockdale, Texas.
Alcoa said it will disclose additional curtailments "in the near future".
Alumina owns 40 per cent of Alcoa World Alumina & Chemicals, the world's largest alumina business, with Alcoa the manager and owner of the remaining 60 per cent. In early trade, Alumina shares fell more than 3 per cent to a low of $1.085 before recovering slightly to $1.097.
An Alcoa spokesman didn't offer an estimate of the number of jobs affected by the smelter curtailments.
The company said it would take an after-tax charge of between $US155 million and $US165m, or between US15 cents and US16c a share, on its fourth-quarter earnings. Alcoa is set to report its fourth-quarter results Monday.
Alcoa said the moves would improve its cost position and competitiveness. The company also said it would accelerate steps to reduce the escalating cost of raw materials.
"These are difficult but necessary steps to improve Alcoa's competitiveness, preserve and grow shareholder value and protect jobs in the rest of the Alcoa system," chairman and chief executive Klaus Kleinfeld said.
He said the company would work with the communities, workers and unions where it is closing facilities.
Benchmark aluminium prices on the London Metal Exchange fell 18 per cent in 2011 as a slowdown in global growth raised worries demand might falter. The cost of some raw materials used to create the energy intensive metal didn't decline by a similar amount, pressuring margins throughout the industry.
During the recession, Alcoa idled a quarter of its capacity and cut thousands of jobs to save money as demand slumped. The curtailments disclosed today are the first for the company since 2009, said Mike Belwood, the Alcoa spokesman.
In October, Alcoa reported its profit more than doubled for a second straight quarter as volume and prices both increased from the prior year. However, prices weakened sequentially and operating margin fell.
Alcoa shares fell 1.4 per cent at $9.23 in after-hours trade, after finishing the regular session down 1 per cent. Through to this morning’s close, the stock lost 43 per cent of its value in the last year.
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