Alcoa Inc said on Thursday it will permanently close its 269,000 tonne-per-year Warrick Operations smelter in Evansville, Indiana, by the end of first quarter, the latest in a string of U.S. smelter curtailments as producers struggle with tumbling prices.
Warrick is the largest operating aluminum smelter in the United States, and its closure will leave Alcoa with just one active smelter: 130,000 ton-per-year Massena West, which was saved from closure with $70 million in aid from New York state.
Warrick's closure demonstrates the pain the industry is feeling from the sharp drop in aluminum prices on the London Metal Exchange CMAL, which fell 18.6 percent in 2015 and are hovering near 6-1/2 year lows at $1,475 a tonne as demand wanes in top-consumer China due to slowing economic growth.
The Midwest premium AL-PREM paid to producers on top of the LME price for physical delivery has also fallen to around 8.9 cents a pound from record highs hit last year, due to the unwinding of lucrative financing deals that kept metal stored in warehouses and a surge in aluminum imports.
Alcoa's move comes two months after it announced plans to idle Massena West and two smelters in Washington state, which are still slated for closure by the end of the first quarter.
The company has now curtailed or closed 812,000 tonnes of smelting capacity since it announced in March 2015 that it was examining 500,000 tonnes for potential curtailment, closure or sale.
In the second half of 2016, Alcoa will split into two separate publicly traded companies, a value-add business that will produce products serving the burgeoning automotive and aerospace industries, and an upstream company including the much-diminished smelting business.
The company also said it will reduce alumina production by one million metric tons by the end of the second quarter, to counter falling prices for the metal.
Alcoa said it will record an associated charge of about $120 million after tax, or 9 cents per share, in the fourth quarter, of which about 45 percent will be non-cash.
(Reporting by Luc Cohen; Editing by Sandra Maler)