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Alcoa Takes Control of Two Smelters by Staff Metal Producing & Processing, June 2006

Eastalco, Intalco add 185,000 mtpy of primary aluminum capacity

July 3 -- Alcoa has gained full ownership of the Intalco and Eastalco smelters from the affiliates of two Japanese trading firms that owned a combined 39% of the operations. No terms have been announced, but both plants had been recognized as losing propositions for their sellers: despite strong first-quarter (March 2006) earnings, Mitsui took a $126-million charge on the U.S. smelters.

Both plants came to Alcoa by way of its 1998 takeover of rival Alumax Inc. Intalco, in Ferndale, WA, is a 278,000 metric tons/year with three potlines and a total of 720 reduction cells. Eastalco, in Frederick, MD, is a 195,000 metric tons/year operation with two potlines and a total of 480 cells.

With the purchase, Alcoa gains roughly 185,000 metric tons/year of primary aluminum capacity. In 2005 Alcan produced 3.35 million metric tons/year of primary aluminum.

Both plants have uncertainties relating to long-range electrical supplies. Eastalco has been idle since last December because it could not secure a satisfactory long-term electrical supply contract. Intalco is operating just one potline in operation for similar reasons.

Alcoa also operates a smelter at Wenatchee, WA, now at about one-half capacity, and in the Northwest it has made some progress with electricity supply. It has agreements with the Bonneville Power Administration and Public Utility District No. 1 of Whatcom County, which will help to reduce the cost impact of market-based power purchases from other energy suppliers after its current BPA contract expires in October 2006.

Alan Cransberg, president of global manufacturing for Alcoa Primary Products, stated: "The financial incentives will certainly help, but even with the incentives, our energy costs in the Northwest will increase significantly. We are exploring all possible options to remain viable at Ferndale during the transitional period from October 2006 to 2011."