Alcoa Holds Groundbreaking Ceremony for $300 Million Expansion of Davenport Works in Iowa

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Researched by Industrial Info Resources (Sugar Land, Texas)--On Friday, March 2, Alcoa Incorporated (NYSE:AA) (New York, New York) held the groundbreaking ceremony for the $300 million expansion of the company's Davenport Works aluminum plant in Riverdale, Iowa. In attendance were Iowa Governor Terry Branstad and Lieutenant Governor Kim Reynolds.

The expansion comes as automakers steadily increase the amount of aluminum used in vehicle production. Alcoa states that car manufacturers have said that they will increase aluminum use from the current 343 pounds per car to approximately 550 pounds per car by 2025, as they replace steel with lightweight, durable aluminum. Upon completion, which is expected by the end of 2013, the expansion will create an additional 150 jobs at the plant, as well as 150 jobs during the construction process. The expansion will more or less double the size of the Davenport Works from 5.5 million square feet to approximately 11 million square feet.

An Alcoa press release states that the materials produced at the plant "will be used bumper-to-bumper in automobiles and includes Alcoa 951 technology--a state-of-the-art pre-treatment that improves adhesive bonding for vehicle assemblies. The process is used to pre-treat aluminum alloy sheet, extrusions and castings to enhance bonding performance and will be licensed across the auto industry."

Worldwide aluminum demand has been increasing steadily as countries have recovered from the global economic slowdown. In its 2011 earnings conference call, held in January of this year, Alcoa reported that despite a slowdown in the second half of 2011, global aluminum demand had grown an estimated 10% for the year, following a global demand growth rate of 13% in 2010. For additional information, see January 11, 2012, article - Alcoa Ends Strong 2011 with Tough Fourth Quarter, as Solid Profits Trump Restructuring Costs for Year. Executives from both Alcoa and Rio Tinto Alcan (Montreal, Quebec) have said that global aluminum demand is expected to double between 2010 and 2020.

Alcoa estimates that there will be a global aluminum deficit of 600,000 tons in 2012. The deficit will come from China, which Alcoa thinks will take offline approximately 1.1 million tons unprofitable capacity this year, despite increasing aluminum demand in the country, which Alcoa says consumes more than 45% of the world's aluminum. Reasons for these anticipated smelter closures include the high costs of importing raw materials, as well as reduced power generation due to coal shortages and drought conditions that have reduced the output of hydropower plants in China. For additional information, see September 16, 2011, article - Power Shortage in China Southern Power Grid to Last into 2012.

The Davenport Works produces aluminum sheet and plate for industries such as aerospace, commercial and passenger vehicles and rail transportation. As these sectors continue strengthening as the economy improves, Alcoa sees aluminum demand growing. The expansion project at the Davenport Works is the first step to help meet this anticipated increase in demand.

As part of our International Metals & Minerals Project Database, Industrial Info is tracking more than $4 billion in active Alcoa projects throughout the world. View Project Report - 300045160

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