Boston, MA 02/20/2014 (wallstreetpr) – Alcoa Inc. (NYSE:AA) has announced it will go forth, with its initial plan to permanently close its Point Henry Aluminum smelter and two rolling mills in Australia. The Point Henry Smelter had been put under review since 2012 to try and find if it is economically viable.
The closure will see a total of 500 employees lose their jobs as of August this year. The two rolling mills that are set to be closed employ a total of 480 employees and mainly caters for domestic and Asian can sheet markets. With the expected closures, Alcoa is expected to be left with smelting operating capacity amounting to 3,760 000 metric tons with 655,000 metric tons of high cost capacity offline.
The closure will see Alcoa Inc. (NYSE:AA) incurring restructuring charges in 2014 expected to be in the range of $250 and $270 million with 60% of this expected to be recorded in the first quarter alone. Its smelting capacity is expected to drop by 190,000 metric tons as a result of the closures, with can sheet capacity production also dropping by 200,000 metric tons.
Alcoa Inc. (NYSE:AA) has also announced it is looking for a buyer for its Anglesea coal mine and power station which currently meet the power demands for Point Henry smelter. Portland smelter in Victoria with bauxite mining in Western Australia will not be affected with the recent announcements. Rising electricity costs with low aluminum prices have been cited as the main reasons behind the expected closures.
Alcoa new joint venture
Alcoa Inc. (NYSE:AA) is currently engaged in a joint venture with Saudi Arabian Mining Co to build a low cost smelter in Saudi Arabia to try and cater for the drop of supply as a result of the closures. According to its chief executive officer Klaus kleinfeld, Australian assets in the recent years have turned not to be competitive and financial sustainable as earlier thought.
The news of the closure had a positive impact on Alcoa Inc. (NYSE:AA)’s stock which moved up by 3.16% on Wednesday trading session to close at $11.76.
