Electricity prices soar Alcoa's Spanish smelter will stop production for two years

AA.US plans to suspend primary aluminium production at its Spanish smelter for two years amid soaring energy prices in Europe.

A spokesman for Alcoa said the company welcomed the majority of workers at the San Ciprian plant in Galicia, Spain, who voted in support of a plan to stop production by the end of 2023. The spokesman said the plan provided a viable future for troubled factories.

"this is a challenging path for all concerned," Alcoa CEO Roy Harvey said in a statement released on Wednesday. With this plan, we now have a way to address the major challenges facing the facility and to build a stronger smelter within two years. "

Alcoa said it would invest $103 million to improve the smelter's competitiveness, including restarting the cell within two years to restore the cost of primary aluminum production. Because of the high cost of shutting down and restarting capacity, aluminum smelters usually keep production at a slower level. In addition, Alcoa recently signed a pre-agreement with Greenalia SA, a Spanish forestry and energy group, which will provide green energy to the smelter for 10 years from 2024.

At the same time, the smelter will continue to supply aluminum to strategic customers in the pharmaceutical and food industries through remelting, while maximizing annual production of 65000 tons of billet and more than 25000 tons of aluminum sheet.

Alcoa also said it expects restructuring-related expenses to be $60 million, or 32 cents a share, in the fourth quarter of 2021. The company also promised to provide full wages and benefits to employees during the plant's two-year shutdown and not to lay off staff.

Alcoa is understood to have been trying to shut down the smelter for years, calling it "uncompetitive". Although aluminium prices have risen more than 40 per cent so far this year, the sharp rise in electricity prices is eroding profitability.

Duncan Hobbs, metals analyst at Concord Resources in London, said: "given the trend of electricity prices in Europe, this is not surprising. Obviously, at the current spot electricity price, it is not profitable to produce metals. "

In the long run, power suppliers can usually meet most of the energy needs of smelters, but spot prices can affect power supply negotiations and can be very expensive if smelters have short-term exposure.