Alcoa to curb aluminum output in Spain after energy costs soar

Alcoa Corp. is set to halt primary aluminum production at its plant in Spain for two years, the latest casualty of soaring energy prices in Europe.

The curbs at Europe’s second-largest aluminum plant come after energy costs spiked to fresh records last week, putting heavy industries under increasing financial strain. Aluminium Dunkerque Industries France, the region’s top smelter of the metal, trimmed output earlier this month.

Alcoa welcomed a vote by a majority of workers at the San Ciprian plant in Galicia to back the proposal to stop output until the end of 2023, said a spokeswoman for the company. She said the plan offers a chance of a viable future to the troubled plant. Alcoa has been trying for years to close the operations, saying the smelter was “uncompetitive.”

The smelter will continue to supply strategic clients in the pharmaceutical and food industries by remelting aluminum, while maximizing billet production of 65,000 tons per year and producing over 25,000 tons of aluminium slab. During the halt, Alcoa has agreed to keep paying workers and not to cut jobs.

While aluminum prices have rallied more than 40% this year, profitability is being eroded by the far greater surge in power prices.

“What’s come to pass here is no surprise given where power prices in Europe are trading,” said Duncan Hobbs, a London-based metals analyst at Concord Resources. “It’s pretty clear that it’s not profitable to be making metal today at today’s spot power prices.”

Alcoa said it will invest $103 million to improve the plant’s viability, including the cost of restarting electrolysis tanks to recommence primary aluminum production in two years time. Aluminum smelters are typically slow to curb production as the costs of shutting down and restarting capacity are high.

Alcoa recently signed a pre-agreement with Greenalia SA to provide the plant with green energy for 10 years from 2024.

(By Irene García Pérez, with assistance from Archie Hunter)