Alcoa says potline suspended at massive Saudi smelter

Reuters

Oct 16 (Reuters) - Alcoa Inc said on Wednesday thatthe massive smelter run by the Ma'aden-Alcoa joint venture hastemporarily shut down one of two potlines due to problems duringramp-up.

Repairs at the $10.8 billion facility, which Alcoa owns andruns with Saudi Arabian Mining Co, could stretch wellinto next year, and Alcoa said it will now accelerate theramp-up of the second, unaffected line.

Production stopped "after a period of pot instability"during ramp-up of the potline, it said. It said it does notexpect any impact on customers.

Combined, the two lines will have the capacity to produce740,000 tonnes per year of aluminum. The rest of the operation -which includes a mine, a refinery and a rolling mill - remainson schedule, Alcoa said.

Few other details were available and it is not clear how, ifat all, the shutdown may affect Alcoa's target for the smelterto reach full capacity sometime next year. A potline is a seriesof containers used to reduce, or smelt, aluminum.

Glitches after commissioning are not unusual. But thisoutage comes at a crucial time as Alcoa shifts primary aluminumoutput to the Middle East, where power costs are lower, andshuts higher-cost output in Europe and North America.

The global industry is also struggling with weak aluminumprices and falling physical premiums, as a massive surplus ofmetal washes around the world.

"Alcoa now have a problem they'll be talking about through2014," said Robert Unger, principal at aluminum industryconsultancy Planned Technology Associates Inc.

The outage, coming on the heels of recent cuts at otherproducers, gave aluminum prices a small boost, even as mostanalysts agree more capacity needs to be taken offline beforethe global surplus of an estimated 10 million tonnes is used up.

Aluminum benchmark prices on the London MetalExchange were up 0.38 percent at $1,856 per tonne, aftertouching an intraday high of $1,865.75.

Alcoa owns 25 percent of the joint venture, with SaudiArabian Mining Co holding the balance.

KEY PROJECT

The Saudi project is important to Alcoa, and not justbecause of its size. The company has said it should be thelowest-cost facility in the world, and it is ramping up as theindustry pushes to cut expenses.

Alcoa said it expects to bring the potline back into servicebetween the first and second quarter of next year.

When Alcoa reported quarterly earnings last week, ChiefFinancial Officer William Oplinger said both potlines at thesmelter would be operating by the end of this year.

"Ramping up production at this facility will help themmanage their company-wide input costs," said Morningstar analystAndrew Lane. But Lane said that in the grand scheme of things,the idled potline is a relatively minor issue.

Alcoa shares were up 1.3 percent at $8.49 on the New YorkStock Exchange late on Wednesday morning.

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