Alcoa Restructures U.S. Aluminum Production

---

Researched by Industrial Info Resources (Sugar Land, Texas). In June 2006, Alcoa (NYSE:AA) (Pittsburgh, Pennsylvania) announced that it had recently acquired full ownership in its Intalco (Ferndale, Washington) and Eastalco (Frederick, Maryland) aluminum smelters. The companies had previously been a joint venture with Mitsui & Company, Limited (NYSE:MITSY) (Tokyo, Japan) and YKK Corporation (Tokyo, Japan), which together held a minority interest of 39% of the two smelters.

The Intalco smelter in Ferndale, Washington, with an operating capacity of 278,000 metric tons a year, was idled temporarily in December 2005, due to Alcoa’s inability to negotiate a viable, competitive, long-term energy contract for the smelter. Intalco plans to restart a second potline in the first half of 2007, which will increase production by 7,500 metric tons a month, up to 180,000 metric tons a year, or two-thirds of its total production capacity. All but one of Intalco’s potlines have been shut down since April 2003. Intalco employs about 450 workers and plans to add another 170 associated with the start-up of the second potline next year. The company’s present power agreement with the Bonneville Power Administration and Whatcom County Public Utility District #1 terminates this month. Alcoa has signed agreements with the two companies that would allow it to secure financial benefits to help reduce the cost of power through 2011.

Alcoa’s Eastalco smelter in Frederick, Maryland, has an operating capacity of 195,000 metric tons a year and employed about 639 people. While the smelter is not officially closed, it is not producing now, and only 50-55 employees remain. Some of the workers have since been relocated to other Alcoa plants. The company has been trying for years to successfully negotiate a reasonably-priced power contract, if not from its erstwhile supplier, Allegheny Power, then with another company, which is considering building a new power plant in the area in the next couple of years. Alcoa, at one time had considered constructing its own power plant at the site, but economics have not yet aligned for that project.

Besides Intalco and Eastalco, Alcoa operates another smelter in the U.S., the Wenatchee Smelter, in Malaga, Washington (also in the region of the Bonneville Power Administration), with a 220,000 metric ton a year production capacity.

Alcoa is the world's leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets bringing design, engineering, production and other capabilities of Alcoa's businesses to customers.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.