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UPDATE 2-Alcoa demolishing two plants, sees $120 mln charge
April 5, 2010 / 9:51 PM / 8 years ago

UPDATE 2-Alcoa demolishing two plants, sees $120 mln charge

* Closing Badin, Eastalco smelters

* Sees $120 mln after-tax charge

* Sees $80 mln charge from U.S. health care overhaul (Adds analyst’s comment, background, additional details)

HOUSTON, April 5 (Reuters) - Alcoa Inc (AA.N) said on Monday it plans to shut and demolish two previously idled plants, citing market fundamentals.

Alcoa will permanently shutter its Eastalco smelter in Frederick, Maryland which has a capacity of 195,000 metric-tons-per-year and its smelter in Badin, North Carolina which has a capacity of 60,000 metric-tons-per-year, it said in a regulatory filing.

Global demand for aluminum has not rebounded as quickly as that of steel and other metals since the start of recession started in December 2007.

The price of the metal plunged 18 months ago from highs of about $3,300 per tonne, and has slowly risen to around $2,300 on Monday.

The Alcoa plant closures will result in an after-tax charge of $120 million in the first quarter, it said in a filing with the U.S Securities and Exchange Commission.

”These smelters were not running,“ Affiliated Research Group analyst Charles Bradford said. ”Eastalco, in particular, was a situation where the power contract ran out.

“And it was a perfectly good smelter from an efficiency standpoint and every other measure you would look at, except that the power cost that was offered to them was just so high that you could not justify running the plant,” he added.

The company also expects to record additional charges of $10 million to $15 million for various costs related to the demolitions from 2011 through 2015, it said.

Bradford told Reuters the destruction of the two facilities ”won’t affect the market, but it will affect Alcoa’s cost.

“Because even if you are not operating the plant and don’t even have it on maintenance, it costs you for security,” he said.

Alcoa will also take an $80 million charge in the first quarter related to the U.S. healthcare overhaul signed into law last month by President Barack Obama, it told regulators.

Also on Monday, Alcoa said it is increasing its investment in a planned $10.8 billion aluminum complex in Saudi Arabia after some of the U.S. company’s partners in a consortium dropped out [ID:nLDE6340JP].

In a change in the ownership structure, Alcoa will now pay about $1.1 billion over four years up from the $900 million it had said in December. (Reporting by Anna Driver in Houston and Carole Vaporean in New York; editing by Andre Grenon and Leslie Gevirtz)

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