Beginning immediately, Alcoa is curtailing the remaining production at its Rockdale aluminum smelter, comprising about 150,000 metric tons of production a year. Alcoa will adjust alumina production accordingly.
The Rockdale plant decades ago was the company’s largest smelter in the United States with eight potlines in operation. The Rockdale Alcoa plant will continue to operate its aluminum atomizer in Rockdale as well as its anode operations there, employing a combined 140 people.
In June, the company laid off 160 smelter employees when it idled three of the plant’s six operating potlines representing about 120,000 metric tons per year of production as a result of ongoing local power supply issues, which led to Alcoa suing Luminant last month.
Luminant, owner of the lignite-fired Sandow Steam Electric Station Unit 4, provides electricity to Alcoa’s Rockdale Operations.
Alcoa layoffs are not expected to impact operations at the Sandow 4 unit, nor the Sandow Steam Electric Station Unit 5, which is under construction with a completion date set for next August, Luminant spokesman Tom Kleckner said.
Meanwhile, Luminant officials in a press release charged that Alcoa has a history of using layoffs to manage costs and drive the company’s profitability, and “is once again refusing to take responsibility for its business decisions.”
“Nothing at Sandow has changed since Alcoa’s last round of layoffs that could have precipitated Alcoa’s decision to curtail the remaining production at its Rockdale smelter,” said Luminant officials, which rebuked Alcoa for not acknowledging “its independent decisions, instead of blaming power supply issues and unspecified ‘market conditions.’”
Jim Hodson, spokesman at Alcoa’s Rockdale Operations, said legal issues with Luminant contributed to but were not the only factors that led to the decision to cut production.
“It’s a combination of all kinds of things,” Hodson said. “We shut down half the potlines and that was power related, and we became less competitive operating at half capacity. Then, the price of aluminum drops.”
The curtailment is not called “a permanent shutdown,” Hodson said.
The first potline will be idled in two to three days; the second line two to three weeks later; and the final line will shut down three weeks after that, Hodson said.
Alcoa will continue to pay for electrical power it buys from Luminant from the Sandow 4 power plant, and will use what is needed to run the atomizer and carbon plant.
“Whatever is left, we will try to recover our costs by marketing that in the Texas energy market,” Hodson said.
The decision to shut down the three potlines was a difficult choice for Alcoa, Hodson said.
“It’s a sad time,” Hodson said.
John Thuestad, president of Alcoa’s U.S. Primary Products business, said, “When we initially curtailed half of our aluminum production in Rockdale, we said it would be extremely challenging to try to be competitive operating only half of the plant. Unfortunately, the cumulative effect of operating only half of the smelter, well-known issues regarding the cost and long-term reliability of the power supply in Rockdale and current market conditions has forced us to make this difficult decision.
“The ongoing effort and dedication of our employees and our community are what make this especially difficult,” Thuestad said. “We will look to work with our community and the region to ease the impact and try to return Rockdale to being a globally competitive producer of metal.”
Alcoa will record a third quarter 2008 pre-tax charge of about $48 million to cover the costs of the curtailment.
“Following this curtailment of smelting, Alcoa will continue to pay its cost of generation from Sandow Unit 4 and we will attempt to recover that cost by marketing the power in the Texas energy market,” Thuestad said.
Bernt Reitan, executive vice president and group president of Alcoa Primary Products, said, “Our re-powering efforts across our global portfolio has gone extremely well - such as our recent MOU (memorandum of understanding) in Quebec, covering approximately 25 percent of our output, and elsewhere. We will continue to explore options to secure a competitive long-term power solution that enables profitable operation in Rockdale, just as we have done across the world.”
jwilliams@temple-telegram.com
