Alcoa 2015 Annual Report Download - page 90

United States and Brazil, partially offset by the permanent closure of the Poços de Caldas smelter in Brazil (96 kmt-
per-year). Base capacity declined 96 kmt between December 31, 2015 and 2014 due to the previously mentioned
permanent closure of the Poços de Caldas smelter. A detailed description of each of these actions follows below.
At December 31, 2014, Alcoa had 665 kmt of idle capacity on a base capacity of 3,497 kmt. In 2014, idle capacity
increased 10 kmt compared to 2013 due to the curtailment of 159 kmt combined at two smelters in Brazil, mostly
offset by the permanent closure of the Portovesme smelter in Italy (150 kmt-per-year). Base capacity declined 540 kmt
between December 31, 2014 and 2013 due to the permanent closure of both a smelter in Australia and two remaining
potlines at a smelter in the United States (274 kmt combined), the previously mentioned permanent closure of the
Portovesme smelter, and the sale of Alcoa’s ownership stake in the Mt. Holly smelter (see above). A detailed
description of each of these actions follows below.
In March 2015, management initiated a 12-month review of 500 kmt in smelting capacity for possible curtailment
(partial or full), permanent closure or divestiture. This review is part of management’s target to lower Alcoa’s smelting
operations on the global aluminum cost curve to the 38th percentile (currently 43rd) by 2016. In summary, under this
review, management approved the curtailment of 447 kmt-per-year and the closure of 269 kmt-per-year. The following
is a description of each action.
Also in March 2015, management decided to curtail the remaining capacity (74 kmt-per-year) at the São Luís smelter
in Brazil; this action was completed in April 2015. In 2013 and 2014 combined, Alcoa curtailed capacity of 194 kmt-
per-year at the São Luís smelter under a prior management review (see below).
Additionally, in November 2015, management decided to curtail the remaining capacity at the Intalco (230 kmt-per-
year) and Wenatchee (143 kmt-per-year) smelters, both in Washington. These two smelters previously had curtailed
capacity of 90 kmt-per-year combined. The curtailment of the remaining capacity at Wenatchee was completed by the
end of December 2015 and the curtailment of the remaining capacity at Intalco is expected to be completed by the end
of June 2016.
Furthermore, in December 2015, management approved the permanent closure of the Warrick, IN smelter (269 kmt-
per-year). This decision was made as this smelter is no longer competitive in light of prevailing market conditions for
the price of aluminum. The shutdown of the Warrick smelter is expected to be completed by the end of March 2016.
Separate from the 2015 smelting capacity review described above, in June 2015, management approved the permanent
closure of the Poços de Caldas smelter effective immediately. The Poços de Caldas smelter had been temporarily idle
since May 2014 (see below) due to challenging global market conditions for primary aluminum and higher operating
costs, which made the smelter uncompetitive. The decision to permanently close the Poços de Caldas smelter was
based on the fact that these underlying conditions had not improved.
In May 2013, management initiated a 15-month review of 460 kmt in smelting capacity for possible curtailment. This
review was aimed at maintaining Alcoa’s competitiveness despite falling aluminum prices and focused on the highest-
cost smelting capacity and those plants that have long-term risk due to factors such as energy costs or regulatory
uncertainty. In 2014, an additional 250 kmt of smelting capacity was included in the review. In summary, under this
review, management approved the closure of 146 kmt-per-year and 274 kmt-per-year and the curtailment of 131 kmt-
per-year and 159 kmt-per-year in 2013 and 2014, respectively. The following is a description of each action.
Also in May 2013, management approved the permanent closure of two potlines (105 kmt-per-year) that utilize
Soderberg technology at the Baie Comeau smelter in Quebec, Canada. Additionally, in August 2013, management
approved the permanent closure of one potline (41 kmt-per-year) that utilizes Soderberg technology at the Massena
East, NY smelter. The shutdown of these three lines was completed by the end of September 2013. The Baie Comeau
smelter has a remaining capacity of 280 kmt-per-year composed of two prebake potlines and the Massena East smelter
had a remaining capacity of 84 kmt-per-year composed of two Soderberg potlines (see below).
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