Alcoa to close Washington magnesium smelter
(UPDATE: adds analyst quote, background, updates stock price)
NEW YORK, June 22 (Reuters) - Alcoa Inc. (NYSE:AA), the world's largest producer of aluminum, said on Friday it will close its Washington magnesium smelter due to high production costs and poor market conditions and lay off about 300 out of 325 workers employed there.
Northwest Alloys, located in Addy, Washington, has operated at two-thirds capacity in 2001, processing 30,000 metric tonnes per year (mtpy) of magnesium, which is used in metal-manufacturing processes.
``It's basically a make-or-buy decision. Magnesium is even more energy intensive to smelt than aluminum,'' said Lloyd O'Carroll, analyst with BB&T Capital Markets.
High electricity prices in the Northwest means that magnesium can be bought more cheaply than it can be produced there, he said, especially since Norsk-Hydro has had a significant magnesium smelting capacity in Canada for the past five years.
Over the past few months, Alcoa has idled aluminum smelting capacity in the Northwest and returned electricity back to the local public utility.
Alcoa said it will lay off about 300 workers between October 1 and December 31, 2001. It said it will cover its North American requirements through contracts with a number of worldwide suppliers.
Shares of Alcoa slipped 0.7 percent, or 28 cents, to $39.40 in midday trade on the New York Stock Exchange on Friday.