Alcoa Inc (NYSE:AA) has basically thrown in the towel on trying to produce aluminum products in the United States. Cheap Chinese aluminum has flooded global markets over the last few years and Alcoa simply cannot compete.
The iconic American metal smelting firm announced on Thursday that it plans to permanently close the Warrick Operations smelter in Evansville, Indiana as of the end of March, which will result in the loss of 600 jobs. The one-time king of the aluminum industry noted it is also shutting down its only bauxite refining capacity in Point Comfort in Texas, eliminating 670 jobs at that facility.
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As of March 31st of this year, the historic American firm that trail-blazed the use of the lightweight metal in products from airplanes to toys to beverage cans will have only one operating aluminum smelter in the small Massena West plant in upstate New York.
Statement from Alcoa management
“Despite the hard work of employees, these assets are not competitive,” Roy Harvey, president of Alcoa’s Global Primary Products, noted in a statement released Thursday. “We’re confident that these actions are the right ones in face of these challenging market conditions. We are committed to creating a resilient business ready for launch as an independent company in 2016.”
U.S. aluminum industry on the ropes due to cheap Chinese imports
Analysts point out that Alcoa has already made public its plan to split itself up into two companies, separating the money-losing raw materials business so its value-adding downstream operations are freed up to stay profitable as they can purchase the primary metal less expensively.
Aluminum prices are down by 30% this year, hitting their lowest level since 2009. Prices may be set to drop even lower as production costs in China, which accounts for half of the global aluminum supply and no longer needs much of the metal it produces, are likely to decrease as the Chinese government continues to depreciate its currency.
Today’s announcement by Alcoa is just the latest damage to a U.S. industry that is suffering sorely from the slowdown in China. Remember that the Chinese government keeps unprofitable mills operating in order to tamp unemployment down and minimize social unrest. Given that aluminum production is very energy-intensive, China’s metal smelters are indirectly create tens of thousands of coal mining jobs.
Global industry group the Aluminum Association estimates that among the 50 highest-cost aluminum smelters in the world, 37 are located in China.
A recent report from AA notes: “Unfair practices are putting advanced U.S. manufacturing jobs at risk.”