U.S-based aluminum giant Alcoa Inc (NYSE:AA) announced on Monday, August 25th, that it plans to close down its Portovesme primary aluminum smelter because of the untenably high cost of smelting at the facility. After intensive study, it was determined that the high cost of smelting at the plant made continued operations not viable and competitive in the market.

Alcoa Inc (AA)

Alcoa Inc (NYSE:AA) has agreed to provide ongoing financial social support for the impacted community, as well as assisting with outplacement and re-employment services for former employees.

The firm noted that closing the expensive operation will decrease Alcoa’s worldwide smelting capacity by 150,000 metric tons to around 3.6 million metric tons per year.

The Portovesme smelter, which has been in limited production mode since November 2012, was one of the expensive smelters in the Alcoa Inc (NYSE:AA) system. Earlier in the year. Alcoa also announced the closure of several other economically nonviable facilities in the U.S. and Australia.

Statement from Alcoa

“The fundamental reasons that made the Portovesme smelter uncompetitive unfortunately have not changed. We will continue to meet the commitments made to our employees and our stakeholders, acting in good faith as we have always done,” elaborated Bob Wilt, President, Alcoa Global Primary Products, in a statement released today.

Creating a globally competitive commodity business

Alcoa Inc (NYSE:AA) also mentioned in the statement that the closure of the Portovesme smelter is expected to result in total restructuring-related charges of around $0.14 to $0.15 per share in third quarter 2014. The company also noted that about 60% of these charges are non-cash.

The long-awaited move to shut down the Portovesme Smelter is just another piece of Alcoa Inc (NYSE:AA)’s medium term strategy to build a globally competitive commodity business. The firm also also targets bringing its position on the global aluminum production cost curve down to at least the 38th percentile by year end 2016.