Alumina and Alcoa Put off $1.8bn Expansion
[2009-01-16]
ALUMINA and Alcoa have shelved the $1.8 billion expansion of the Jamaica refinery.
This has resulted in a $40 million write-down to Alumina's full-year profit.
The announcement came as US aluminium giant Alcoa, Alumina's senior partner in the joint venture with Alcoa World Alumina & Chemicals, reported a fourth-quarter loss of $US1.19 billion after sales dropped off by 19 per cent and it was hit by one-off charges of $US920 million.
Alcoa last week announced asset sales, salary freezes, a 15 per cent cut in its workforce and a 50 per cent reduction in capital spending to try to stem its losses amid a big slowdown in demand for its products.
But analysts have questioned whether even those moves will be enough and say more industry-wide production cuts are needed.
Alumina chief executive John Bevan highlighted the $US162 million operating profit of Alcoa's alumina unit, saying it was still making a profit despite a 21 per cent drop from last year.
All Alumina's assets are in its 40 per cent stake in AWAC, which is operated by Alcoa.
Alumina said the Jamalco project, which was approved in 2005 and supposed to boost alumina production by 1.5 million tonnes, was not expected to be undertaken in the near future due to the current economic environment.
Mr Bevan said it had also been delayed from its 2007 start date due to a failure to secure gas supply but the project was low-cost and expected to go ahead when conditions improved.
Deutsche Bank analyst Paul Young said Alcoa's ability to raise $US1.9 billion of debt in the fourth quarter was a positive sign for Alumina, which was looking to refinance $US300 million of debt by the end of the month.
Mr Young said he expected Alumina to report a full-year profit of $198 million, down 55 per cent, when its results were released next month but that the following year would see a $231 million loss.
Mr Bevan said Deutsche's 2009 aluminium forecast of US69c a pound was probably pessimistic and that supply cuts were starting to bring production back in line with demand, which could result in higher prices.
This has resulted in a $40 million write-down to Alumina's full-year profit.
The announcement came as US aluminium giant Alcoa, Alumina's senior partner in the joint venture with Alcoa World Alumina & Chemicals, reported a fourth-quarter loss of $US1.19 billion after sales dropped off by 19 per cent and it was hit by one-off charges of $US920 million.
Alcoa last week announced asset sales, salary freezes, a 15 per cent cut in its workforce and a 50 per cent reduction in capital spending to try to stem its losses amid a big slowdown in demand for its products.
But analysts have questioned whether even those moves will be enough and say more industry-wide production cuts are needed.
Alumina chief executive John Bevan highlighted the $US162 million operating profit of Alcoa's alumina unit, saying it was still making a profit despite a 21 per cent drop from last year.
All Alumina's assets are in its 40 per cent stake in AWAC, which is operated by Alcoa.
Alumina said the Jamalco project, which was approved in 2005 and supposed to boost alumina production by 1.5 million tonnes, was not expected to be undertaken in the near future due to the current economic environment.
Mr Bevan said it had also been delayed from its 2007 start date due to a failure to secure gas supply but the project was low-cost and expected to go ahead when conditions improved.
Deutsche Bank analyst Paul Young said Alcoa's ability to raise $US1.9 billion of debt in the fourth quarter was a positive sign for Alumina, which was looking to refinance $US300 million of debt by the end of the month.
Mr Young said he expected Alumina to report a full-year profit of $198 million, down 55 per cent, when its results were released next month but that the following year would see a $231 million loss.
Mr Bevan said Deutsche's 2009 aluminium forecast of US69c a pound was probably pessimistic and that supply cuts were starting to bring production back in line with demand, which could result in higher prices.
Source: www.world-aluminium-market.com
Keywords:Alumina; Alcoa
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