Alcoa aluminium cutbacks signals the end of an iconic US industry

ALCOA’S latest aluminiummaking cutback is signalling the end of the iconic American industry.

For 127 years, the New Yorkbased company has been churning out the lightweight metal used in everything from beverage cans to airplanes, once making it a symbol of US industrial might.

Now, with prices languishing near six-year lows, it is wiping out almost a third of domestic operating capacity, Harbor Intelligence estimates. If prices do not recover, the researcher predicts almost all US smelting plants will close by next year.

While that is a big deal for the US industry and the people it employs, it does not mean much for global supplies. The company’s decision to eliminate 503 000 tons of smelting capacity accounts for about 31 percent of the US total for primary aluminium, but less than 1 percent of the global total, according to Harbor.

For more than a decade, output has been moving to where it is cheaper to produce: Russia, the Middle East and China.

Global glut

A global glut has driven prices down by 27 percent in the past year, rendering US operations unprofitable and accelerating the pace of the industry’s demise. “You’ve seen a fair clip of closures in the US, that is just unfortunate, but a development that’s very difficult to change,” Michael Widmer, the head of metal markets research at Bank of America in London, said. “It means you’ll just have to purchase from somewhere else.”

Aluminium is down 19 percent this year to $1 501 (R20 716) a ton on the London Metal Exchange. The metal touched $1 460 last week, the lowest since 2009, and most American smelters cannot make money when prices are near $1 500 or below, Harbor estimates. Plants overseas usually have the advantage of lower labour costs, cheaper energy expenses and weaker domestic currencies that favour exports to the US.

When Monday’s plans are undertaken, it will have closed, divested or curtailed 45 percent of smelting capacity since 2007. – Bloomberg