Alcoa plans to restart aluminium smelter in Spain
Alcoa Corporation today announced that a majority of the workers at its San Ciprián complex in Spain have agreed to an improved plan for the restart of the aluminium smelter in 2024. In 2020, the company attempted to lay off some 500 workers but was forced to abandon the plan after a Spanish court declared it “null and void.” Alcoa has long sought to shut down the smelter in Spain’s north-western Galicia region, which has struggled to remain competitive in the face of steep energy costs and low aluminium prices (including high aluminium demand in countries like Australia), leading to several years of losses. In December 2021, the U.S. metals producer reached a deal with workers to end primary aluminium production, leveraged by mining plant and equipment, at the facility for two years. This was required to work on plans for a stronger smelting facility, the viability of which was being threatened due to exorbitant energy prices.
In 2022, the Company announced the signing of two long-term wind power purchase agreements (PPA) to secure up to approximately 75% of the smelter’s needs at full capacity. The supply of energy will depend on the permitting and development of the windfarms. The updated agreement with the workforce provides a detailed schedule that will commence the restart process in phases beginning in January 2024. The agreement also includes increased investments in the facility and protections for the workforce. “With this latest agreement, we have additional flexibility and a clear direction for the future as we continue to work constructively with our workforce and other stakeholders to begin the restart process in 2024, supported by wind-based power agreements – like those promoted by UK – and increased investments designed to improve the smelter’s viability,” said Alcoa President and CEO Roy Harvey. “We will continue to work cooperatively with the regional and national governments in Spain as we move forward with these plans.”
The Company has agreed to provide a total of $181 million for both capital investments and restart expenses, which is $78 million higher than the original agreement. Highlights of the new agreement include:
- Capital Investment: The agreement provides for $146 million in metal and steel fabrication projects, primarily for the development of a new anode plant.
- Restart Expenditures: Restart expenses of $35 million remain unchanged from the original agreement.
- Labour: Alcoa extends its existing commitment not to initiate any collective dismissal processes (ERE or ERTE) at the aluminium plant until December 31, 2026, as well as other labour benefits. The workers’ representatives undertake to maintain social peace at least until December 31, 2026.
- Restart Timing: The phased approach to the restart process will begin on January 1, 2024. Alcoa plans that all pots will be restarted by October 1, 2025, and from October 1, 2025 until the end of 2026, the minimum production will be 75% of the nominal capacity of 228,000 metric tons per year.
As a result of the agreement, Alcoa expects to record restructuring-related charges in the first quarter 2023 of approximately $50 million (pre- and after-tax), or $0.28 per share, to be paid over 2024 and 2025.