Alcoa reviews facilities to secure competitive power contract

For the second time in two years, Alcoa is examining its smelting capacity and may reduce output from its nearly two dozen facilities, which include a Berkeley County smelter, Alcoa Mt. Holly.

The review comes as Alcoa Mt. Holly and Santee Cooper face a June 30 deadline for negotiations over Alcoa’s power rate. The current contract expires in 2015, and the two sides find themselves in a position similar to last year, when Alcoa Mt. Holly dodged corporate smelting cutbacks in the midst of contract negotiations that led to the one-year extension.

“As we have stated in the past, securing a competitive power contract is essential for the long-term viability of Mt. Holly operations in our region,” said Erin Pabst, a spokeswoman for Alcoa Ht. Holly.

“Because of persistent weakness in global aluminum prices, we need to review every option to maintain Alcoa’s competitiveness,” said Chris Ayers, President of Alcoa’s Global Primary Products.

Alcoa announced the 15-month review in early May, saying the company is examining about 11% of its smelting capacity and may need to reduce that capacity since aluminum prices have fallen more than 33% since their peak in 2011, when cash buyers were paying nearly $2,800 per ton.

The review will also focus on plants with higher costs and plants with more long-term risk from energy costs or regulatory uncertainty.

Alcoa will consider a variety of alternative actions during the review, including curtailments and permanent shutdowns. Its alumina refining system will also be reviewed.