High energy prices and infrastruture bottlenecks continue to wreck "excess" and future capacity. This kind of story is just the tip of the iceberg:
Reuters
UPDATE - Alcoa says shelves Brazil aluminum smelter project
Wednesday January 7, 5:38 pm ET
(Adds details, company comment, changes dateline, previous RIO DE JANEIRO)
NEW YORK, Jan 7 (Reuters) - Alcoa Inc. (NYSE:AA - News) shelved exploratory plans to invest $1.3 billion in a new aluminum smelter in Brazil because of high energy costs, a spokeswoman for Alcoa's Brazilian subsidiary said on Wednesday.
Speaking by phone from Sao Paulo, the Alcoa Aluminio S.A. (NYSE:AN - News) spokeswoman said plans for a 500,000-tonnes-a-year smelter had been dropped because of doubts that Brazil's new energy policy would guarantee competitive energy prices.
"Because of some of the economic policies regarding energy in the country, we are not going to continue looking into building a smelter there," said a spokesman at Alcoa's headquarters in Pittsburgh.
He said Brazil's energy policies would not jeopardize aluminum production already operating in Brazil.
"We've scrapped plans on that particular project, but we have other plans to do other things. It was strictly because of the energy issues in Brazil," the spokesman said.
"These were very very initial types of plans," he said.
While Alcoa said it uses 25 percent as an average cost of energy associated with aluminum output, in Brazil, energy accounts for closer to 35 percent of output costs.
If the Brazilian government revised its energy policy, he added that Alcoa "would be happy to revisit."
During a visit to Brazil in June, Alcoa Chief Executive Alain Belda unveiled plans to invest $2.7 billion in Brazil by 2010 to increase aluminum output and energy supplies.
The program had included a new smelter, expansion of the Alumar smelter in the northeastern city of Sao Luis, and five hydroelectric power stations.
The corporate spokesman said Alcoa's plans for the remaining $1.4 billion investment in Brazil remained in place.
"The $1.4 (billion) that's left, we're still looking at," he said. "We plan to continue making investments in the country to help grow our business there."
While Alcoa did not elaborate on how Brazil's energy policies would impact its developmental plans, Canada's Alcan Inc. (Toronto:AL.TO - News) also said on Wednesday that high electricity transmission and distribution costs may cause its Brazilian unit to suspend investment in some power plants.
According to a Brazilian newspaper, the president of Alcan Brasil, Joao Beltran Martins, said power distribution costs had more than tripled in the past three years due to additional charges, most of them government imposed.
Martins said the government launched a new set of rules for the power sector late last year that were aimed at solving a prolonged power crisis, but which failed to address the issues of major electricity consumers.
Aluminum producers in Brazil stepped up investment in their own power generation plants after a period of power rationing in 2001 curtailed aluminum output in the country. |
