Alcan cuts production by a third but no jobs lost

Dec 11 2008 by Peter McCusker, The Journal

A THIRD of production at the huge Alcan plant in Northumberland has been halted until at least next spring as the recession bites deep into demand for aluminium.

Managers of the Lynemouth plant yesterday tried to reassure its 650 staff after its parent company Rio Tinto unveiled plans to axe 14,000 jobs worldwide.

They recently shed 13 jobs through voluntary redundancy at the UK’s largest aluminium smelter and its adjoining power station near Ashington, and workers were worried after Rio Tinto said it wanted to cut costs by cutting a tenth of its workforce.

The company told The Journal that it shut 128 of its 352 aluminium smelting pots and does not expect to reopen them until “the second quarter” of next year.

A company spokesman said: “We have temporarily suspended one-third of our production. We are still working round the clock but some our of our pots have been taken out of production as demand for aluminium is showing decline.

“During that time we will be undertaking maintenance work with a view to starting them up in the second quarter of next year. There will be no impact on our head count.”

He added: “Lynemouth is in good shape. We’re doing well and continue to do well. This announcement has to be put into context as it covers all of Rio Tinto’s operations across the globe.”

However, the anxiety caused by the announcement prompted Alcan managing director Wyn Jones to issue a notice to all the company’s staff.

In it he said: “I cannot tell you how, if at all, this will impact our operations in the UK. I know this will cause some concern and as soon as I can tell you more, I will.

“However, what I can say right now is that the early action we have taken to suspend some production at Lyne- mouth and Lochaber (its sister plant) has been well received by colleagues in Europe, Montreal and Rio Tinto’s corporate head office in London.

“The aluminium market is difficult at this time and the price on the London Metal Exchange remains exceptionally low at present, being below the cost of production of many smelters in the world.

“Part of this is undoubtedly due to the time of year as it is usual to see a pre-Christmas decline in demand before an upturn in the New Year. However, the credit crunch is badly affecting our customers’ customers and so on down the supply chain.”

Predominately a mining company, Rio Tinto became the world’s biggest aluminium company following the acquisition of Alcan last year. It employs more than 1,000 people in the UK.

Rio Tinto is being squeezed by sharp falls in commodity prices in the economic slowdown, and huge declines in demand for some consumer products, such as cars, is reducing aluminium demand.

Yesterday, The Journal reported how Nissan was shutting its Sunderland plant for six days in the run-up to Christmas as sales of new cars had fallen by 40%.

Rio’s chief executive Tom Albanese said the company’s focus in the current climate was on maximising cash generation and paying down debt.

Rio Tinto says it wants to reduce its debt by up to £7bn by the end of next year.