Alcoa Shifts North American Expansion Focus

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). In what seems a never-ending series of project studies and corporate maneuvering, Alcoa Incorporated (NYSE:AA) (Pittsburgh, Pennsylvania) is continually reviewing options for future expansion of its North American operations. Focusing mainly on the company's operations in the Canadian Province of Quebec, Alcoa is searching out energy alternatives, to find economic electricity to power planned future primary aluminum capacity expansion in North America. Alcoa has already begun a shift from U.S. based capacity to Canada for its North American operations. U.S. primary aluminum production is too costly in today's market.

Early this year Alcoa lost out to Alcan in securing 500MW of specially priced electricity from the Quebec government and Hydro Quebec. Not to be deterred, Alcoa is proceeding with several studies, which could result in expansion at one or more of the company's aluminum smelters in Quebec. In recent years, Alcoa has looked at several scenarios to increase primary aluminum capacity in Quebec. The newest development involves a study to modernize the company's Baie-Comeau smelter.

Alcoa expanded its North American primary aluminum capacity in 2000 with the acquisition of Reynolds Metals, including a 400,000 tons per year smelter located in Baie-Comeau, Quebec. Alcoa has selected Bechtel Quebec (Montreal, Quebec) to perform a bankable feasibility study to replace the smelter's Soderberg electrolytic cells with more modern technology. The company has not decided on a technology yet, and plans to review the results of the feasibility study by the end of the year.

Earlier this year Bechtel and BPR formed a joint venture known as BPR-Bechtel. The company hopes to capitalize on synergies resulting from each other's expertise in engineering and the aluminum industry in North America. If the Baie-Comeau project is approved, BPR-Bechtel will supply process design for the project.

The Baie-Comeau smelter currently utilizes about 500MW of electricity and has alerted Quebec province owned Hydro Quebec of its requirement of an additional 100MW to support the change.

The company is also looking at building new smelters in nearby Newfoundland and Iceland.

Alcoa's Lauralco smelter located in Deschambault, Quebec has a capacity of 235,000 tons per year and has been studying a new pot line, which would double aluminum smelting capacity there. The Lauralco expansion would require an additional 400MW of power.

Last year Alcoa signed an alliance agreement with Hatch & Associates, Incorporated (Montreal, Quebec), where Hatch would provide engineering, procurement, and construction management for capital programs at five of Alcoa's smelters located in Northwest North America.

Alcoa also has a 75% interest in Aluminerie de Becancour Incorporated, which operates an aluminum smelter in Becancour, Quebec. The Becancour Smelter has a capacity of 370,000 tons per year. In early 2000 the company had looked at adding a fourth electrolytic pot line at Becancour which would have boosted capacity up to 480,000 tons per year.

The company has studied expansions at all of its Quebec operations in the last two years, but is currently focusing on the Baie Comeau study. Which of these smelters, if any, will be expanding? Only time and power supply will decide.