MONTREAL - Slumping aluminum prices and a declining economy have prompted the permanent closure of Rio Tinto Alcan's (NYSE:RTP) Beauharnois smelter and a refinery production cut, part of a streamlining at the metals giant that will reduce 1,100 jobs globally, including 300 in Quebec.
Tuesday's announcement of the smelter closure and output cuts at the Vaudreuil alumina refinery is part of a new six per cent reduction in aluminum production to meet slumping global demand, Rio Tinto Alcan said Tuesday.
The cuts will affect about 800 Rio Tinto Alcan employees and 300 contract workers.
"In order for us to maintain our leadership and remain competitive, we must make difficult but necessary choices," incoming chief executive Jacynthe Cote told a news conference after she met with affected employees at Beauharnois, where she worked for three-and-a-half years.
"We know this will have an effect on families and entire communities."
Rio Tinto Alcan faces a difficult market, with falling prices and reduced demand for aluminum because of slumping economies in the United States, Europe, Japan and China.
Two weeks ago, Alcoa Inc. (NYSE:AA), the world's third-largest aluminum maker, announced it will cut 13,500 jobs, or 13 per cent of its workforce, and slash spending and output to cope with the global economic slowdown.
The reductions expand on cost-cutting measures announced in October, when Alcoa reported a 52-per cent decline in third-quarter profit due to sharply lower aluminum prices, weaker demand and a charge from curtailing a smelter in Texas.
The Pittsburgh-based company said it also will cut 1,700 contractor positions and sell four business units. It has imposed a global salary and hiring freeze.
At Rio Tinto Alcan, the Beauharnois smelter southwest of Montreal, which opened in 1943 and employs 220 people, will stop operations by the end of the second quarter this year.
About 50 jobs are being eliminated at the Vaudreuil refinery about 200 kilometres north of Quebec City, where annual production of alumina will be "temporarily curtailed" by 400,000 tonnes.
Alumina is a metallic powder made from bauxite ore and which is used in the smelting of aluminum, a light-weight metal used in packaging, aircraft components, auto parts and numerous industrial and consumer products.
In a related development at Rio Tinto Alcan, the company will cut carbon operations in half at its Centre de produits cathodiques in Jonquiere, Que.
Other actions by the company to streamline operations include the planned sale of Rio Tinto's half-interest in the Alcan Ningxia joint venture in China.
"The decisions were making today definitely are difficult but they reflect the tough market we are currently in," said Cote, noting aluminum prices have plummeted 65 per cent and now stand at 2004 levels.
"We know the industry will recover and we want to make sure we'll be strong and up and running."
This second wave of output reductions, which totals 11 per cent and amounts to about 450,000 tonnes annually, follow earlier curtailments in late 2008 that saw output cut by five per cent as the company struggled "to align production with customer demand."
Efforts are underway to reduce costs to prevent the need for future closures, but Cote said there are no guarantees.
"I can't give guarantees and I can't predict what will be the price of aluminum in the next few months," she said, adding "times are tough," particularly for older plants.
"Their costs are higher... They are the plants that will work very hard to reduce their costs."
Cote insisted the cuts do not contravene continuity agreements signed with the Quebec government in 2006.
She said the job cuts will take effect gradually and that some workers will be eligible for retirement while others may be relocated to other plants. The rest will be looked after according to provisions in their latest contract, she said.
The company said Cote, who is replacing CEO Dick Evans when he retires Feb. 1, has undertaken an extensive review of the company's organizational structure and operating strategy in light of the current economic situation. The review is to be completed in early February.
The Beauharnois smelter, with 52,000 tonnes of annual production, uses technology that was to be phased out by 2015 to meet environmental regulations. The company said casting work might continue at the plant.
Other curtailments affect Rio Tinto Alcan operations as far afield as New Zealand, Britain and Cameroon, a country on the west coast of Africa.
Rio Tinto shares declined $5.99, 6.75 per cent, to US$82.78 in Tuesday trading on the New York Stock Exchange.
