Alcoa Inc (AA) Closing Point Henry Smelter & Mills in Australia

Alcoa Inc. (AA) announced that it will permanently shut down its Point Henry aluminum smelter and two rolling mills in Australia by the end of 2014.

Alcoa had put the Point Henry smelter under strategic review since 2012 due to the challenging market conditions and found that the smelter had no prospect of becoming financially viable. The smelter, which employed about 500 people, will close in Aug 2014. Once the Point Henry closure is complete, Alcoa will have a total smelting operating capacity of around 3,760,000 metric tons, with roughly 655,000 metric tons, or 17% of high cost capacity offline.

The two rolling mills, which cater to the domestic and Asian can sheet markets, have been impacted by excess capacity. The mills, employing about 480 people, are expected to close by the end of 2014.

Alcoa will incur restructuring charges in 2014 related to the closures. These charges are expected to be in the range of $250 million–$270 million after-tax and non-controlling interest, or 22 cents to 25 cents per share, of which roughly 60% would be recorded in the first quarter.

Alcoa’s global smelting capacity will be reduced by 190,000 metric tons following the closures and the company’s can sheet capacity will also decrease by 200,000 metric tons. Including the closure of the Point Henry smelter, Alcoa has announced closures or curtailments of about 551,000 metric tons of smelting capacity, exceeding the 460,000 metric tons placed under review in May 2013.

Alcoa also announced that it will seek a buyer for the Anglesea coal mine and power station, which currently provide 40% of the power needs for the Point Henry smelter. The company announced that its Portland smelter in Victoria will continue to operate, along with its Australian bauxite mining and Western Australia state alumina refining operations.

Alcoa is making capital investments and remains on track to move down the cost curve and curtail capacities in its upstream business. The curtailments will improve the competitiveness of the company’s Primary Products business.

Alcoa, a prominent player in the mining industry along with Aluminum Corporation of China Ltd. (ACH), Atlatsa Resources Corp. (ATL) and BHP Billiton Ltd. (BHP), is a world leader in production and management of primary aluminum, fabricated aluminum, and alumina.