Black China Blog

This story comes from the Australian Broadcasting Corporation (ABC).     there’s some parts of this that don’t make a lot of sense.

On a historical basis, the relationship between the Aussie and US currencies is not sufficient reason to justify layoffs.   At the moment the Aussie is trading at about US$0.91.   But over the years the range has been as low as $0.48 to as high as $0.95.     The smelter itself is enjoying preferential electricity pricing, and with 30 years of operations under its belt, there can’t be a lot of capital charges left to pay.

The article also leaves blank the question of whether further layoffs will occur.   According to the story, the company had discussions with the unions about “all facets of the business.”   They got at least 11 people put up their hands, and apparently have been given payouts.   But after calling for a widespread review of costs, it is hard to imagine they will stop at 11.  

Many of my former workmates left Alcoa’s Point Henry smelter to transfer to the then-new Portland project.   I remember it was billed as a great employment and life-style opportunity, although one enterprising foreman that I worked with saw more lucrative financial returns.   I recall he told everyone he would move to Portland, not to join the construction or operations team, but to buy two local businesses – the taxi service and the local cathouse.   He reckoned that with so many people flooding to the town, those two businesses were set for a major boost.

Here is the story.

Voluntary redundancies have been offered to 11 workers at the Alcoa aluminium smelter in Portland.

The American-owned company is undertaking a restructure to improve its global productivity.

Alcoa spokeswoman Anna Impey says the low US dollar has affected profits.

She says the company received more than 11 expressions of interest for voluntary redundancies.

“The announcement of the offer to give voluntary redundancies follows an extensive consultation process with our employees and the unions, which we started back in April when we announced that a further restructure program involving all facets of the business was taking place to improve profitability and international competitiveness,” she said.

Alcoa said Thursday that it plans to shut its two aluminium smelters in Italy by Feb. 6, but could restart them if the company is able to secure power for them.

Alcoa announced in November that it would suspend operations at the smelters temporarily after the European Commission prohibited electricity subsidies that the Italian government was providing, claiming the smelters would operate at a loss without them.

“If we are able to secure power, we would want to restart both smelters,” the company spokesman told Dow Jones Newswires.

Talks between the company and government have been ongoing, Alcoa said.

The two smelters have a combined annualized capacity of 194,000 metric tons of aluminium.

 The following article appeared in today’s China Daily, quoting Reuters.

Updated: 2009-07-10 08:07

NEW YORK: Alcoa Inc posted a third consecutive quarterly loss on Wednesday, but cost cuts helped the largest US aluminum maker beat Wall Street estimates by a large margin, sending its stock higher.

Chief Executive Officer Klaus Kleinfeld later told analysts there were signs that weak demand for aluminum – which has prompted production cuts and plummeting metals prices in the last nine months – might be easing.

“We still have challenging global markets, but there are some pockets of growth,” he said, citing such near-term catalysts as China, production curtailments, destocking of aluminum inventories and government stimulus programs.

China will be a near-term importer of aluminum, but Beijing’s stimulus programs for its own industry will eventually change the picture, he said on a conference call.

“We don’t expect imports (to China) to go on forever,” he added.

The Alcoa head said that, although Alcoa still sees a 7 percent decline in global aluminum demand this year, the company expects US auto build rates to rise in the second half of 2009 as carmakers replenish low inventories.

In the beverage can sector, Alcoa expects a “reasonably stable” performance with steady US demand in the summer.

Alcoa, like other metals makers, has pared back operations and cut jobs in the face of weak prices as the poor global economy cut demand from the construction, electronics and auto sectors.

“They (Alcoa) were able to do better than expected from cost savings,” said Brian Hicks, co-manager of US Global Investors’ natural resources fund. “Year-over-year production is down and down sequentially as well, but it looks like they were able to contain costs.”

Kleinfeld said the company has achieved some $1.0 billion in procurement savings through the first half of the year, or about two-thirds of the full-year target. Overhead savings year-to-date are around $270 million, or 134 percent of the full year target for 2009, he said.

Alcoa shares were up nearly 5 percent at $9.92 in post market trading after closing at $9.46.

The second-quarter net loss was $454 million, or 47 cents per share, compared with earnings of $546 million, or 66 cents per share in the same quarter of 2008, the Pittsburgh-based aluminum producer said.

But the loss from continuing operations, was 32 cents per share and, excluding restructuring, the loss was 26 cents. That was better than the 38 cent-loss analysts were expecting, according to Reuters Estimates.

Revenue slumped to $4.2 billion from $7.2 billion a year earlier, as Alcoa curtailed aluminum and alumina production in response to reduced demand.

“It’s a beat,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco, who added the results could give the markets a boost. “We’re due for a bounce. Markets are oversold.”