Alcoa postpones Italian aluminum smelter shutdown

NEW YORK Fri Feb 5, 2010 4:15pm EST

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NEW YORK Feb 5 (Reuters) - Alcoa Inc. (AA.N) will continue discussing ways to resolve energy costs at its aluminum smelters in Italy and will not curtail its two plants there on Feb. 6 as previously announced, a spokesman said on Friday.

"We are continuing to analyze and continuing to talk. We're hopeful that the Italian government and the European Commission can help us resolve this situation. And we'll take it from there," Kevin Lowery, spokesman for the U.S. aluminum giant, told Reuters.

Asked whether Alcoa still plans to shut its Fusina smelter near Venice and Portovesme plant in Sardinia, he said, "We haven't taken any actions. We're going to continue to talk."

In November, Alcoa said it would temporarily idle operations at its 194,000-tonne-per-year smelters after the European Commission ordered it to pay back most of the state aid it received in Italy since 2006.

A meeting between the Italian government, Alcoa executives and Italian trade unions scheduled for Feb. 8 to discuss the matter was moved to Thursday, Feb. 11, an Italian government source in Rome told Reuters late on Friday without elaborating.

The European Union's executive body ruled that Alcoa must repay state power subsidies previously agreed to by the Italian government and the U.S. aluminum producer.

Alcoa argues that a $300 million penalty imposed by the Commission, currently under appeal, would have a "devastating impact" given the dramatic decline in aluminum prices amid the global recession.

Aluminum prices slid more than 60 percent off record highs reached in July 2008 to the 7-1/2-year low hit a year ago.

"We have a greater than $300 million payment we have to make and we are losing money each month we operate there on top of that. So there needs to be some kind of resolution," said Lowery.

He has said that the issue was over energy costs that both the company and the Italian government wanted addressed, "so the operations can provide jobs."

"Our position is that we want to operate. We're hopeful that the Italian government and the EC (European Commission) can get together and help us be in a position so that we can operate there," he said Friday.

Italian Prime Minister Silvio Berlusconi, who is battling to control rising unemployment and faces important regional elections in March, wrote a letter to Alcoa CEO Klaus Kleinfeld last Friday asking him to wait until the European Commission studies the situation before shutting the smelters on Feb. 6.

Italian unemployment rose to 8.5 percent in December, its highest since monthly records began in January 2004, and Italy has one of the industrialized world's lowest workforce participation rates at only 22 million people from the 60 million population.

Alcoa's Italian operations employ about 2,000 people.

(Additional reporting by Gavin Jones in Rome; Editing by David Gregorio)

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