Alcoa to idle Italy smelters

Alcoa Ltd will temporarily idle production at its two aluminium smelters in Italy, saying the European Commission's recent ruling on Italian electricity tariffs has made the operations unviable. "... The two smelters, which have a combined employment of approximately 1,000 and an additional 1,000 indirect jobs and a combined capacity of 194,000 metric tons of aluminium per year, are not viable at current Italian power rates," Alcoa said in a statement to the market. Under the recent move, the European Commission decided that Italy’s extension of the existing electricity tariff after 2005 did not comply with European Union (EU) state aid rules. Alcoa said it would appeal the decision, which would also force the company to refund a portion of the benefit it received under the electricity tariff. Alcoa expects to take a fourth quarter pre-tax charge of between $300 million and $500 million for the action, but said most, if not all, of the charge was not expected to impact cash flow. Alcoa president Klaus Kleinfeld said it was a dark day for heavy industry in Europe. “The EC is sending a signal to investors and workers that heavy industry is no longer a priority,” Mr Kleinfeld said. The move in Italy will bring the company's total global smelting curtailments to 24 per cent. Mr Kleinfeld said the decision was hard to understand, particularly given the economic crisis. “Skilled and long-term jobs will be lost, facilities will be closed, and companies in Europe will not be able to compete,” Mr Kleinfeld said. “The EC’s decision, which was not based on a complaint by a competitor or any third party, will effectively shut down Italian aluminium production and make the European aluminium industry less competitive in the worldwide markets." Mr Kleinfeld said the company planned to appeal the decision. "Alcoa will appeal the decision and take immediate action to improve the profitability of our smelter operations,” he said. Alcoa said it would begin curtailing the smelters, in Fusina and Portovesme, immediately, with the process expected to be completed towards the end of December. The electricity tariff was in place for more than 10 years in Italy, and approved by the European Commission in 1995, when Alcoa purchased the operations. It was designed to provide competitive power to energy intensive industries in Italy, in line with similar energy costs in other EU countries. Alcoa's rolling mill in Fusina has not been directly impacted by the moves.