Alcoa announced today it is postponing construction of a new potline at its Baie-Comeau smelter in Québec as part of a revised modernization plan for the smelter, but will begin preparations for the upgrade by investing $100 million in the smelter over the next three years and by permanently closing the plant’s two Soderberg potlines.
The new potline is now expected to be in service in 2019 instead of 2016, subject to board approval. The change is due to current market conditions.
The $100 million investment includes $30 million that will be used to upgrade the plant’s casthouse facilities in support of the growing automotive market. This is in addition to the $75 million already dedicated to rebuild the port facilities to better meet the future needs of a modernized plant.
“The Government of Québec proved to be very open to reviewing the schedule when it became important for Alcoa to adapt to market realities and make the project as cost-effective as possible,” said Martin Brière, President of Alcoa Canada Primary Products. “These efforts will help move our Baie-Comeau plant down the global aluminum cost curve, and continue to provide important economic benefits to the region.”
The closure of the two Soderberg potlines, which are among the highest-cost smelting capacity in the Alcoa system, will be complete in August. The two lines represent 105,000 metric tons of capacity, and are part of the 460,000 metric tons of smelting capacity Alcoa announced was under review on May 1.
The revised project schedule will not impact Alcoa’s commitments to the Government of Québec, and will have a positive effect on the environment. As agreed in November 2011, the company will provide $50 million over 25 years to the Economic Development Fund managed by the Government of Québec, and will continue to contribute to its Alcoa Sustainable Communities Fund with an investment of $10 million over 25 years for the Baie-Comeau community. In addition, the closure will result in an immediate 40% reduction in greenhouse gas emissions for the Baie-Comeau facility.
Capital costs outlined in the announcement are included in the company’s 2013 plan. Total 2013 restructuring-related charges associated with the closure outlined above are expected to be between $135 million and $155 million after-tax, or $0.11 to $0.13 per share, of which approximately 30% would be recorded in the second quarter. Cash costs during 2013 are expected to total approximately $100 million.