AluNews - March 2003

Pay slashed, but still in millions, for top Alcoa execs

Pittsburgh Post Gazette, PA - 28 Feb 2003
Saturday, March 01, 2003

By Len Boselovic, Post-Gazette Staff Writer

The total compensation of Alcoa's five highest-paid executives tumbled 64 percent last year -- nearly double the decline of the aluminum maker's shares -- as the ailing stock market severely curtailed gains from exercising stock options.

Chairman and Chief Executive Officer Alain Belda, who voluntarily took a 20 percent salary cut, still managed to pull in $5.8 million, including a $1.1 million bonus and $3.5 million from stock options. Belda received $12.8 million the previous year, including a $1.4 million bonus and $9.9 million from stock options.

Executive Vice President and Chief Financial Officer Richard B. Kelson received $2 million, down from $5 million the previous year. His gains from stock options totaled $1 million, down from $3.7 million the previous year.

G. John Pizzey, the executive vice president in charge of Alcoa's aluminum-making operations, was paid $1.6 million, down from $2.9 million the previous year. Vice President Michael Coleman's compensation totaled $1.1 million while Executive Vice President William E. Leahey Jr. received $1 million.

Combined, the five executives received $11.6 million vs. the $32 million the 2001 crop received.

Alcoa shares declined 36 percent last year.

The pay figures were included in a proxy statement filed in connection with Alcoa's April 11 shareholder meeting in Pittsburgh. Dissident shareholders will present two proposals at the meeting, both of which are opposed by management.

To highlight the growing disparity between pay increases for executives and for the average production worker, The Catholic Funds want the company to prepare a report comparing the pay of top executives to that of its lowest-paid workers in 1982, 1992 and last year.

The AFL-CIO Reserve Fund wants to require shareholder approval for future severance agreements, including retirement agreements, that provide benefits of three times an executive's salary and bonus or more. The union fund cited published reports concerning the retirement benefits received by former Chairman Paul H. O'Neill.


Remote China smelter rides economic boom

Reuters, 03.01.03, 8:45 PM ET

By Scott Hillis

QINGTONGXIA, China, March 2 (Reuters) - When Qingtongxia Aluminium was founded nearly 40 years ago in China's remote northern region of Ningxia, its mission was national security, not profits.

The smelter was part of Mao Zedong's "Third Line" plan to set up industrial bases deep in the heart of China to ensure the country's economy would survive a Soviet or U.S. attack.

Today the plant, renamed as Qingtongxia Aluminium Group Co Ltd and ranked as the third-biggest aluminium producer in the country, could be a model for China's drive to turn lumbering state firms into modern global players.

As China's booming economy fuels demand for aluminium, the sprawling 12.5-square km (4.8 square miles) complex has emerged as an economic pillar for Ningxia, which is one of China's poorest regions.

Company President Zhou Jingqi in many ways personifies the shift from Communist planning to free-wheeling capitalism.

A native of the northeastern province of Hebei, Zhou has toiled at the plant for nearly 35 years. He was sent to work at the smelter after graduating from engineering college at age 22.

He worked his way up, holding posts such as workshop chief, vice-chief engineer, and, in 1998, smelter chief.

He has helped guide the smelter through China's often painful reform of the state sector.

SECURE, BUT REMOTE

In 2000, Beijing cut Qingtongxia loose from central control, putting ownership in the hands of the Ningxia government.

While many money-losing state firms have slashed bloated payrolls in a rush to slim down and become profitable, Qingtongxia has rapidly expanded output. Production of primary aluminium rose some 60 percent last year to hit 237,000 tonnes.

In the main production line, housed in a building 930 metres (3,100 feet) long, rows of electrolytic cells superheat alumina, turning the powdered raw material into aluminium -- and profits.

"The company has turned a profit for 25 years," Zhou told Reuters in a recent interview. Last year, Qingtongxia made 200 million yuan ($24 million) on 3.0 billion yuan in revenue.

Qingtongxia's geographic position may have been optimal from a military point of view.

But it is less so from a business perspective. The smelter is about 1,000 km (600 miles) from the ocean, and 540 km from its nearest major supplier of raw material.

Roads are shoddy, leaving the operation wholly reliant on rail to deliver the raw materials, and cart off one-tonne blocks of shiny ingots to customers across the country.

But it is also just a few kilometres (miles) from the Yellow River, China's second-biggest waterway, which offers a stream of energy. Moreover, Ningxia sits atop one of China's biggest coal beds. A nearby coal-fired plant will provide most of the juice to power Qingtongxia's ambitious expansion.

WORKERS HAPPY DESPITE SMOG

Plans to boost capacity to 400,000 tonnes per year within two years, and eventually to 600,000 tonnes per year have meant the plant's workers have been among the most secure in China.

While laid-off workers around the country frequently protest the loss of jobs or meagre severance packages, Zhou boasts: "I am very happy to tell you that not one worker from the company has ben laid off."

Well, sort of.

The main smelting operation has trimmed the number of workers to 5,700 from 6,400 in years past.

But they have been shifted into a myriad of other support and service operations such as transport, machinery manufacturing, construction, and an import and export unit.

"As we've grown, we've taken the workers along with us," Zhou said. "Living conditions and wages have been improved and workers have stable lives and are willing to work here."

There is evidence to bolster that claim.

The town that has sprung up around the smelter has recently built rows of sparkling white apartment buildings and a good-sized sports stadium, and boasts its own television station.

But there are still some issues.

An acrid haze envelopes the area. Much of the pollution is spewed out by a 50,000-tonne-per-year line using technology from the 1960's. China has shut down such smoggy operations elsewhere, but Qingtongxia has kept that unit open, perhaps because its closure could affect jobs in an area with few alternatives.

"We hope to keep it running another five years," said one company official, noting that a 100,000-tonne expansion project is intended to replace the ancient smelting unit.

Copyright 2003, Reuters News Service

Australia's Henry Walker Gets US$72M Jamaican Contract

Monday March 3, 7:04 AM

SYDNEY (Dow Jones)--Australian mining and engineering services group Henry Walker Eltin Group Ltd. (A.HWE) said Monday it secured a 10-year contract from Jamaican bauxite producer Windalco valued at US$72 million.

The contract involves the provision of mining and cable belt operation for the Kirkvine bauxite and alumina complex. In addition, Henry Walker Eltin will operate the nearby limestone operation.

Kirkvine is the third bauxite mining operation in Jamaica to be secured by the Sydney-based company.

Henry Walker Eltin will start work at Kirkvine shortly. In addition to mining, the group will be responsible for a 7.8 kilometer cable belt conveyor.

Windalco is 93% owned by Switzerland's Glencore International AG (Z.GNC), while the remaining 7% is owned by the Jamaican government.

-By Lilly Vitorovich, Dow Jones Newswires;

61-2-8235-2963; lilly.vitorovich@dowjones.com


Longview Aluminum says power plant on back burner

Reuters, 03.03.03, 2:12 PM ET

NEW YORK, March 3 (Reuters) - Privately held Longview Aluminum LLC said Monday its plans to build a power plant to run its idled Longview, Washington smelter are on the back burner as it tries to iron out disputes with energy-supplier Bonneville Power Administration and aluminum giant Alcoa Inc. (nyse: AA - news - people).

Longview had announced in 2001 it was committed to building a $150 million gas-fueled power plant at the smelter to make it self sufficient by 2003 or 2004. But the idea was shelved after the collapse of Enron Corp. <ENRNQ.PK>, a Longview Aluminum spokeswoman said in a telephone interview.

"Right now we have a lot of other things we're trying to resolve," she said. "I'm sure we'll be looking to all options relative to long-term power, but right now that is not our top priority."

Production at the 204,000 tonnes-per-year aluminum smelter has been closed down since 2001 when Longview agreed to sell contracted power back to BPA during a West Coast energy crunch. Longview had anticipated reopening the plant last year, but a lack of a new labor agreement prevented this, it said.

Last week, Longview got a temporary restraining order barring BPA from ending the smelter's power and transmission contracts, pending further court action in a fixed contract dispute.

Meanwhile, earlier last month, Longview said it filed suit against Alcoa, the smelter's previous owner, over the terms of a $6.9 million ground lease.

The suit alleges that labor unrest associated with Longview's inability to secure a long-term collective bargaining agreement with the United Steelworkers of America Local 305 constituted a "force majeure" and invalidates an early termination provision in the lease.

Alcoa had imposed a condition that required the smelter's new owners to operate one potline, or production line, for four continuous months out of each 22-month period or the ground lease would terminate and the land would revert back to Alcoa, Longview said.

"This issue with BPA includes both power and transmission lines and that is really critical for us to resolve," commented the Longview spokeswoman.

She added that Longview was working with Alcoa regarding the force majeure clause in that case, but that there appeared to be no alternative other than litigation.

Still, sourcing long-term electricity at an affordable price will remain critical to Longview's future profitability, and Longview is open to discussions with potential partners in a power plant, the spokeswoman said.

Alcoa, the world's largest aluminum company, sold the Longview smelter to Chicago-based investment group Michigan Avenue Partners in 2001 as part of a court-ordered divestiture after Alcoa took it over from Reynolds Metals Co.

Copyright 2003, Reuters News Service


B.C. mayor assails Alcan tactics

Cheap electricity now the source of heated dispute

By WENDY STUECK

MINING REPORTER

The Globe and Mail, Canada Monday, March 3, 2003 - Page B3

VANCOUVER -- It has the makings of an old-time movie, with some modern twists.

Small-town mayor Richard Wozney accuses multinational corporation Alcan Inc. of riding roughshod over citizens and breaching the agreement that gave the company rights to vast amounts of land and water in B.C.

Montreal-based Alcan says it is abiding by its contractual obligations, and cares about the town of Kitimat, which was created 50 years ago around the Alcan smelter and today relies on it for hundreds of well-paying jobs.

At the heart of the dispute is not oil or cattle, but hydroelectricity, the resource that drew Alcan to B.C. in the first place. The infamous Enron Corp. has a bit part in the saga, as does an agreement made more than 50 years ago when it likely seemed improbable that electricity generated in B.C. would ever find its way to California.

Today, such a possibility is no longer remote. The electricity that Alcan generates cheaply in Kitimat can fetch a handsome price on deregulated electricity markets. Alcan is not a utility and does not sell to customers directly, but through Powerex Corp., the sales and trading arm of Crown-owned British Columbia Hydro and Power Authority. Mr. Wozney and others accuse Alcan of pursuing power sales from Kitimat at the expense of local jobs, a strategy they say flouts the company's agreement with the province and that could, if pursued indefinitely, leave Kitimat as little more than a ghost town.

"Alcan is breaching the 1950 agreement that says Alcan is to use electricity primarily for industrial purposes," said Mr. Wozney, a lawyer now serving his second term as mayor after being acclaimed last year. "We are not going to stand still and watch this happen."

Alcan strongly denies any breach of contract.

"Alcan is respecting its agreements," said Mathieu Bouchard, Montreal-based vice-president of corporate and environmental affairs for Alcan's primary metal group. "That is part of our code of conduct, that is the way we operate -- there is no way that we would not respect those agreements."

The company also denies allegations by Mr. Wozney and others that it is using revenue from power sales from Kitimat to support operations in Quebec or elsewhere. The company points to $50-million it spent on environmental improvements to the aging Kitimat smelter in the past year as evidence of Alcan's commitment to the region. And it maintains that the smelter is running at less than full capacity as a result of market conditions, not of any scheme to boost power sales.

To date, the province backs Alcan's position. A spokeswoman for B.C. Competition Minister Rick Thorpe said government lawyers have reviewed the agreements and found that Alcan was acting within their restrictions.

The current controversy over power sales goes back to June, 2001, when Alcan, facing a severe water shortage, said it would cut smelter production to 50 per cent of capacity and increase power sales, in a move it said was designed to maintain sales and avoid layoffs. Alcan had earlier cut production by 10 per cent.

Employees went along with the plan, but there was soon rumbling that the company was selling increasing amounts of electricity.

In June, 2002, Alcan announced it would restart 60,000 tonnes of annual production capacity that had been shut down, bringing production back up to 240,000 tonnes, or about 87 per cent of the smelter's capacity of 275,000 tonnes a year.

The remaining capacity, Mr. Bouchard says, remains idle as a result of poor aluminum prices.

Mr. Wozney and his staff maintain that Alcan has steadily increased power sales over the past three years, and that the company is driving the Kitimat smelter into the red by charging it market rates for electricity the company generates at a cost said to be among the lowest in the world.

Citing corporate confidentiality, Mr. Bouchard will not say how much electricity Alcan sells, or what the smelter pays for its electricity.

But he says power sales also take place in Quebec and elsewhere in Alcan's widespread holdings and are a key part of the company's corporate strategy.

"Globally, it's part of our business," Mr. Bouchard says. "It's a way to maintain us in a very competitive way, that is quite clear."

Among those worried about Alcan's power sales, there is also another concern: how a $100-million arbitration decision against the company could affect Kitimat operations.

In 1997, as part of the settlement agreements with the province over the cancelled Kemano Completion Project, Alcan sold a portion of a power supply contract with B.C. Hydro to an Enron subsidiary. The sale was on the condition that Alcan remain liable for Enron's obligations, up to $100-million.

After Enron filed for bankruptcy in December, 2001, Powerex claimed the contract was terminated and filed a claim against Enron. Then, in February, 2002, Powerex filed a claim against Alcan.

The issue went to arbitration in Oregon and in January a ruling was announced in Powerex's favour. The two companies are now discussing how the decision could be enforced. One scenario could see Alcan comply by supplying electricity -- a prospect not welcomed by those already worried about increasing power sales.

As the debate over Kitimat's future continues, there has been some attempt at compromise. Mr. Bouchard said a task force, including local politicians and business interests, was set up last month to look into economic development alternatives for the region.

Mr. Wozney, however, is adamant that Alcan is in breach of its 1950 agreement with the province and that Kitimat is suffering as a result. The solution, he maintains, is for Alcan to cease power sales and to live up to earlier commitments it made to expand and rebuild the smelter.

"Alcan is using B.C. taxpayer water resources for investment elsewhere," Mr. Wozney said recently. "This is simply not right."

Longview Aluminum Files for Chapter 11 Bankruptcy Protection

Company Officials Remain Committed to Protecting Smelter Asset and Jobs

Press Release Source: Longview Aluminum Tuesday March 4, 7:47 pm ET

LONGVIEW, Wash., March 4 /PRNewswire/ -- Officials at Longview Aluminum confirmed this afternoon that today the company filed a petition for voluntary Chapter 11 bankruptcy protection in Federal Court in Delaware.

Today's Chapter 11 filing follows the company's successful efforts last week to receive a temporary restraining order prohibiting the Bonneville Power Administration (BPA) and its Executive Director Steven Wright from terminating the aluminum smelter's power and transmission contracts pending further order of the Court. Longview Aluminum officials, including Chairman Michael Lynch, have long acknowledged that ensuring access to a long-term supply of affordable power and transmission would be key to our ability to profitably operate the smelter.

"Since receiving the injunction last week, we've been meeting with our team of advisors to investigate every remedy and alternative available to us," said Lynch. "Finally, we determined that the Chapter 11 filing and reorganization would be our best path to restarting this smelter, protecting this asset, preserving these jobs and contributing to the economic welfare of the region."

Longview Aluminum Chairman Michael Lynch expressed frustration with the lack of consistency in the power buy-back agreements BPA negotiated with other aluminum companies in the region, including global industry behemoth Alcoa. Unlike Longview Aluminum's contract with BPA, many of these agreements included "easy out" clauses which allow companies unencumbered exemption from their contractual "take or pay" obligation should they be able or choose to secure alternate power sources. Such options were never presented to Longview Aluminum.

"BPA's inconsistent and uneven enforcement of its power buy-back agreements was a major factor in our decision," acknowledged Lynch. "Their misguided energy policy has resulted in a deindustrialization of this region and, if allowed to continue, will only result in more manufacturing job loss and economic hardship."

Longview Aluminum is a high-purity aluminum smelting facility in Longview, Washington.

Northwest's main energy provider cuts back land projects

Helena Independent Record, MT ,Tuesday, March 04, 2003

by The Associated Press

KALISPELL (AP) - The Bonneville Power Administration is tabling eight wildlife conservation projects in four states totaling $11 million, and $2 million of that was earmarked for two projects in the Flathead.

BPA, the region's largest hydroelectric producer,says it simply doesn't have the power to make good on all the plans.

"We're looking at a hefty rate increase, and our customers are telling us to cut and delay whatever we can," said spokesman Ed Mosey.

The Montana projects on the chopping block are a $1 million investment in Flathead Valley farmland upstream from Flathead Lake, and a $1 million investment in fisheries the state was looking to buy from Plum Creek Timber Co.

"We're trying desperately to cut costs wherever we can," Mosey said. "Land acquisition is one of those areas."

The agency says it has been whipsawed by rapid fluctuations in the electricity market since prices spiked in 2000. When prices rose, it had to buy expensive power and sell it at previously contracted prices below its cost.

To avoid general rate increases of more than 200 percent, BPA paid some of its big industrial customers (including Columbia Falls Aluminum Co. and nine other aluminum smelters) to close up shop. That cost was less than BPA would have lost on the electricity the plants were entitled to receive.

BPA had hoped to sell surplus hydropower in the spring and early summer on that same high-priced market, but by then the market had settled down and prices were nearer historic averages. In addition, 2001 was a severe drought year, and so not much surplus hydroelectric was available, anyway.

Likewise, 2002 was what Mosey calls a "sub-par water year," and 2003 "is looking like drought conditions again."

But even as drought has supply down, prices are on the rise again. Electricity on the open market has jumped to $60 per megawatt, he said, driven by drought and a natural gas shortage. Unfortunately, BPA has no surplus to sell into the rising market.

"The result," Mosey said, "is BPA is facing a $900 million shortfall between now and 2006, when the current contracts expire."

BPA has said that by 2006, the gap between its revenue and its costs could reach $1.2 billion.

The Northwest Power Planning Council blames at least part of BPA's trouble on the agency's own fiscal management and accounting practices. The council also criticized BPA for collecting fish and wildlife mitigation dollars as part of customers' rates, but then not spending that revenue on fish and wildlife programs.

Industry watches price of power

By MICHAEL JAMISON

Montana Forum, Montana Tuesday, March 4, 2003

COLUMBIA FALLS The region’s big industries pay some mighty big power bills, and as the price of a megawatt soars, the Pacific Northwest becomes a less and less attractive place to do business.

We’re being told by our customers that this jump in power prices could be the straw that breaks the camel’s back, said Ed Mosey, spokesman for the Bonneville Power Administration. Honestly, there is an air of desperation in the region.

Of the 10 big aluminum producers that worked in the region five years ago, Mosey said, only two are currently open, both hobbling along somewhere far below full tilt.

In Montana, the Columbia Falls Aluminum Co. is running at 60 percent, but so far the camel’s back is doing just fine, said company spokesman Haley Beaudry. CFAC has spread out its power contracts, he said, and buys from dozens of sources instead of just a couple as in years past.

And that, Beaudry said, should help the plant stay open amid rising power prices.

The plant has not, however, always remained open. When electricity prices jumped from less than $20 per megawatt to more than $1,000 megawatts a few years back, CFAC and the rest of the region’s aluminum producers simply shut down.

Back then, CFAC relied heavily on the quasi-governmental BPA to provide cut-rate juice from dams in the Columbia River Basin. But in the early days of deregulation, BPA promised to sell 3,000 more megawatts than it could produce, hoping to buy low and pass the savings along.

When prices went through the roof, BPA faced purchasing those 3,000 megawatts at astronomical cost.

CFAC was among the major industries that agreed to shut down, thus reducing BPA’s commitments. Since then, the plant has restarted but has not run at full capacity.

Aluminum needs power prices of under $30 per megawatt to be economic, Mosey said. Today’s price is about $60. They won’t last long with those prices.

Beaudry, however, expects to last, at least for now.

It’s absolutely correct that you can’t make aluminum with $60 power, Beaudry said. It just doesn’t work. Period. But we’re not buying $60 power.

Instead, he said, CFAC is buying power through contracts signed while electricity was relatively cheap. It is a complicated deal in this post-deregulation world, he said.

The company that used to rely heavily on BPA power and held just one or two power contracts now has dozens of contracts that kick in during different times of the day, under different conditions. Some are short-term, some are long-term.

But one fact remains: If the core contracts end at a time when power costs much more than $30 per megawatt, and if CFAC cannot sign cheaper long-term deals, then it doesn’t make much sense to make aluminum.

The margins are slim. If the top end is about $30 per megawatt, no one is hoping for a low end below, say, $20 or $25.

We always have concerns, Beaudry said, and power is always top among them.

That’s because for every dollar increase in the cost of a megawatt, CFAC’s annual power bill climbs by about $3 million. At full production, the plant consumes about one-quarter of all the electricity used in Montana.

If aluminum was $2 a pound, you could pay a lot for power, Beaudry said. Aluminum, however, goes for about 65 cents per pound.

We’re watching this market very closely, he said, and you can bet we’re not buying any $60 power. The hope is that by the time our contracts come up, the price will have dropped again.

That is, of course, possible, especially considering the highly volatile nature of the electricity market. Just last week, for instance, power had jumped to $130 per megawatt amid concerns of natural gas shortages and drought.

I think this (price spike) won’t last, Beaudry said. What’s going on right now is a reaction to the news about low water and the reality of cold weather. We can ride that out.

Others, however, aren’t so sure. According to Mosey, BPA already is talking with big customers like Weyerhaeuser and Boeing, trying to pave the way and ease the pain for expected rate increases.

The big customers aren’t so sure they like the sound of a more expensive future. Boeing, for one, has moved a substantial percentage of its production out of the Pacific Northwest, and has relocated its corporate headquarters from Seattle to Chicago.

The fact is, a lot of these companies were here because of cheap hydropower, Mosey said. If the rates go up, at a time when the economy is not good, it could be the last straw for some of them. We all need a break. Somehow, things have got to start going our way.

Iceland's Parliament approves Alcoa smelter project

NEPA News, PA , March 05, 2003

Iceland's Parliament gave final approval Wednesday to a plan to build a power plant and aluminum smelter with the American aluminum giant Alcoa Inc., despite intense criticism from environmentalists.

Legislators voted 41-9, with one abstention, to permit Industry Minister Valgerdur Sverrisdottir to sign an investment contract with the Pittsburgh-based conglomerate.

The approval "paves the way for Alcoa to build one of the most modern and competitive aluminum facilities in the world," said Alain Belda, the company's chairman and chief executive.

Alcoa, the world's largest aluminum producer, is expected to sign four final contracts within a month.

The company has been negotiating with Iceland's government for a more than a year over its plan to build a huge power plant and smelter in the country's rugged Eastern Highlands. In August 2001, Iceland's State Planning Agency vetoed the project citing possible environmental harm, but Environment Minister Sif Fridleifsdottir overruled that decision.

Environmental groups say it will ruin one of Europe's last wildernesses, an area of icy glacial rivers, volcanos and craggy gorges that is home to rare wildlife and plants.

The government says the project's economic benefits would outweigh the environmental harm.

The new facility would employ about 450 workers, and the government says it will create 300 service jobs and more than 1,800 temporary construction positions in a depressed area.

Alcoa has said it was working with conservationists to ensure the environmental impact would be minimal.

The project involves damming two rivers to create a 22-square-mile reservoir above Vatnajokull, Europe's biggest glacier, in the Eastern Highlands. The power will be used to drive an aluminum smelter on the coast.

The company says the project will be completed in 2007 at a cost of about $1.1 billion, although media reports have put the price as high as $3 billion.

The smelter could produce 295,000 tons of aluminum a year, eventually doubling Iceland's production.

Vekselberg Buys 6 Regional Energo Stakes

Moscow Times, Russia Thursday, Mar. 6, 2003. Page 5

By Tatyana Yegorova

Viktor Vekselberg, co-owner of No. 4 oil major Tyumen Oil Co. and No. 2 aluminum holding SUAL, has accumulated sizeable stakes in six regional energy suppliers through a newly founded company called Complex Energy Systems.

CES spokeswoman Olga Kiselyova said the company will manage energy assets owned by Vekselberg personally and by investment company Renova, in which Vekselberg owns a stake, and is interested not only in cheap power generation, but also heat, power distribution and utilities.

"This is unique," Zenit Bank analyst Sergei Suverov said. "A well-known business leader not only officially announced an interest in power, but emphasized that the sector itself interests him, not only for the chance to buy cheap energy to use for industrial production."

He said Vekselberg was probably looking for a good way to invest the money he earned from selling stakes in SUAL and the Tyumen Oil Co., or TNK.

Vekselberg was one of the beneficiaries of the $6.75 billion deal struck last month between BP and TNK, and of the multimillion-dollar partnership deal struck between SUAL and London-based Fleming Family & Partners in January.

However, some analysts suggested the new company is unlikely to work autonomously from SUAL and TNK.

Aton analyst Alexander Korneyev noted that SUAL operates aluminum smelters in six regions where CES has invested.

The energy-intense aluminum industry benefits strongly from cheap domestic power.

CES now manages a 10 percent stake in Irkutskenergo, owned by Vekselberg through affiliated organizations since 2000. It also holds significant, but unspecified, stakes in the Pechora hydroelectric plant and the local energos in Perm, Rostov-on-Don, Sverdlov, and the Komi republic. CES employees have been nominated to the boards of these five companies.

The number of shares held by CES "varies and may change before the next shareholders meeting," a source close to SUAL said.

CES's stakes in Rostovenergo, Permenergo and Komienergo are already large enough to influence decision making, the source added.

But the stake in Sverdlovenergo is "insufficient," to wield full control, he said.

Oleg Fyodorov, an executive with the Investor Protection Association, estimated that Vekselberg now holds blocking stakes in the Rostov and Perm energos.

Fyodorov, who also sits on Sverdlovenergo's board of directors, estimated CES's stake in that firm at about 10 percent.

The SUAL source termed CES's stake in the Pechora hydroelectric plant "a chance investment."

The energos themselves said they could only guess about their new owners.

Only Sverdlovenergo said the new investors had come to meet with company management.

Management at Komienergo and Permenergo said they had not known for sure whether their new shareholders were LUKoil or SUAL even after new board candidates were nominated.

MDM Energo Stake

Moscow Times, Russia Thursday, Mar. 6, 2003. Page 6

MOSCOW (MT) -- MDM Group clinched a deal to buy a 30 percent stake in Kuzbassenergo, supplier of electricity to one of the country's largest concentrations of heavy industry, Vedomosti reported Wednesday.

An MDM source was quoted as saying the deal is in its final stages, while another source said the sale was complete. The undisclosed price tag is estimated to be above the company's current market capitalization of $109 million.

Moscow-based brokerage and investment bank Renaissance Capital sold the shares, rumored to have been bought on behalf of Russian Aluminum.

The deal would make MDM the largest coal consumer in one of the few regions of Russia where it is not yet the dominant coal producer. Kuzbassenergo currently buys its coal from Kuzbassrazrezugl, a unit of MDM's largest competitor in the coal sector, the Urals Mining and Metals Co.

United Financial Group analyst Fyodor Tregubenko said this shows MDM is taking steps to become a major player on the power market, buying up shares in many energos and national power grid Unified Energy Systems.

Aluminum giant Alcoa to invest $1 billion in Quebec to create 1,500 jobs

CBC News, Canada -12:15 AM EST Mar 06

DESCHAMBAULT, Que. (CP) - U.S. aluminum giant Alcoa announced Wednesday it will pump $1 billion into expanding its smelter near Quebec City, creating thousands of jobs in construction and in the metals industry.

The move will expand the smelter's annual capacity to 570,000 tonnes of primary aluminum from 250,000 tonnes. Overall, the expansion is expected to create 6,500 direct and indirect jobs during the construction period, the company said. Alcoa has also agreed to create a minimum of 1,250 jobs, most in the Quebec aluminum processing industry, and 250 direct jobs at the Deschambault smelter.

Quebec Premier Bernard Landry and Alcoa chief executive Alain Belda made the announcement at a joint news conference on the eve of a provincial election. The vote could come as early as April 14.

Landry has made several major job-creation and spending announcements in recent weeks as the government prepares for its spring budget and the expected spring election.

The Deschambault smelter, on the shore of the St. Lawrence River near Quebec City, has about 550 workers. The operation was bought by Alcoa from Alumax in 1998.

Work isn't expected to begin at the plant until 2006, with production set to begin in 2008 and full expansion by 2013.

"We certainly hope that the project will start in 2006, but the overall aluminum market will determine the timing," Belda said in a release. "This agreement will give us the flexibility to start construction as soon as market conditions warrant."

Under the deal, the world's biggest aluminum company will get preferential hydroelectricity rates, a tax break for 10 years and an interest-free loan of up to $260 million from the Quebec government.

Landry said the project will help place Quebec's abundant hydroelectricity as a cornerstone of the province's economic development. Massive amounts of electricity are needed to produce aluminum metal from raw materials.

"The goal of the Parti Quebecois government with this (deal) is clear - speed up the implementation of a world-class facility for secondary and tertiary aluminum processing and put our hydro-electricity to work for the economic development of Quebec," the premier said.

Last December, Alcoa announced a $1-billion investment in its smelter at Baie-Comeau, Que. On that project, Alcoa also is eligible for a 10-year tax break from the Quebec government and will get a $170-million interest-free loan.

For its part, Alcoa has agreed to employ a minimum of 1,476 people at the Baie-Comeau smelter. Alcoa has more than 4,000 employees in Quebec.

Last September, rival Alcan Inc. of Montreal announced that a five-member consortium would begin a $1.4-billion expansion of the Alouette Inc., refinery in Sept-Iles, Que, this spring. The workforce is to rise to 900 from 560.

In January, Alcan said it will take a year before considering an expansion of the new smelter in Alma, Que. Meanwhile, it will build a potlining centre to melt aluminum in Alma, about 500 kilometres northeast of Montreal, and expand a plant at Saguenay, creating 320 jobs in total.

Aluminerie Alouette/Pact: $18.5M Pact Value

Yahoo News Wednesday March 5, 9:37 PM

SEPT-ILES, Que. (Dow Jones)--Aluminerie Alouette Inc. has signed a three-year carbon supply agreement with SGL Carbon Group of Germany, valued at $18.5 million.

In a press release, Alouette said it and SGL Carbon Group will cooperate in efforts to develop improved carbon products for the aluminum industry through the end of 2005.

Aluminerie Alouette is a consortium made up of Alcan Inc. (AL) with 40%, Austria Metall with 20%, Marubeni Corp. (J.MRB) with 6.67%, Norsk Hydro ASA (NHY) with 20% and Quebec's Societe generale de financement with 13.33%.

-John Moritsugu, Dow Jones Newswires; 416-306-2100

Chileans denounce Noranda project

Environmentalists tour Canadian firm proposing Patagonia aluminum plant

Montreal Gazette, Canada Wednesday, March 05, 2003

MICHELLE LALONDE

The Gazette

Patagonia: the name evokes fresh air, spectacular hikes over snow-capped mountains and fly fishing in pristine rivers.

But if Noranda, the Canadian mining and metals giant, gets its way, Alsén, situated in the middle of Patagonia in southern Chile, may one day be home to a huge aluminum smelter, as well as the three hydroelectric dams and transmission lines required to power it.

Critics of Noranda's environmental and labour relations record in Quebec joined a Chilean delegation yesterday in Montreal to denounce the project.

"Noranda tells us they are responsible corporate citizens, good employers, very concerned about the environment," said Peter Hartmann, an environmentalist who lives in Patagonia, "but we come here and we learn the opposite." Hartman and Chilean member of parliament Alejandro Navarro, who heads his government's committee on natural resources and the environment, have been in Canada for 10 days meeting with Canadian MPs and unions.

Navarro told reporters his country's environmental protection laws are not yet strong enough to police a project like Noranda's.

"There are lots of loopholes in the existing law, and this project will profit from the norms that are missing," Navarro said, through a translator. There is concern, he said, that the smelter would hurt the region's emerging ecotourism and salmon fishing.

The $2.75-billion U.S. Alumysa project would produce 440,000 tonnes of aluminum, and, according to its detractors, 1.5 million tonnes of solid and gaseous waste per year. Noranda has filed an environmental impact study, in hope of getting approval from the Chilean environmental agency within nine months.

Noranda needs a corporate partner and funding for the project, so opponents are hoping their public appeal will discourage potential investors and alert Noranda shareholders.

Noranda spokesman Denis Couture said the project would be "state of the art" and meet the highest environmental standards for aluminum smelters in Canada.

He said they chose the site in the Aysén region of Chile because of the low cost of water rights and land.

He said the groups protesting against the project are actually against any development at all in Patagonia.

"That is not up to Noranda; it is up to the government of Chile."

He said the project would create 8,100 construction jobs and 1,100 permanent jobs in a poor region.

"If there is a company that should develop in Patagonia, it should be us because we have the technological expertise and ethics and moral standards required."

But local environmental activists pointed out that Noranda has failed to meet its own environmental promises in the past. Testing at the company's Magnola plant in the Eastern Townships recently showed emissions of dioxins and furans at levels 58 times and 32 times the amount the company had predicted. Noranda plans to close that plant by this month because of changes in the market.

mlalonde@thegazette.canwest.com


Longview Aluminum assailed by steelworkers

Oregonian, OR - 06 Mar 2003

GAIL KINSEY HILL

Steelworkers lashed out at Longview Aluminum on Wednesday, condemning the company's decision to file for Chapter 11 bankruptcy protection.

"Without notice or warning to its workers, Longview Aluminum has opened another chapter of deceit and betrayal in its relationship with its workers," said Gaylan Prescott , staff representative for the United Steelworkers of America.

Longview Aluminum officials countered that the bankruptcy decision was designed to protect workers' interests, not sabotage them.

"They are completely misunderstanding the situation," said Holly Bartecki, a company spokeswoman. "The sole object of the bankruptcy filing is to reorganize and restart that smelter."

Once production begins again, the company hopes to call back its idled steelworkers, Bartecki said.

Longview Aluminum, purchased by Chicago-based Michigan Avenue Partners in February 2001, lies along the Columbia River just southwest of Longview, Wash. Immediately after the acquisition, the owners shut down the plant, citing high electricity prices and an agreement to sell the power back to the Bonneville Power Administration, which needed the electricity to ease a regionwide shortage.

The smelter remained closed beyond a scheduled April 2002 startup date. Company officials blamed the prolonged shutdown on stalled contract talks with steelworkers.

Problems worsened when the BPA announced it would shut off all electricity to the plant Feb. 28. The agency said the company owed $21 million on its power and transmission contracts. Although the smelter isn't making aluminum, it uses a small amount of power for its offices, a waste-water treatment plan and aviation and marine warning lights.

A last-minute court order prohibited the BPA from pulling the switch. But the stay is temporary, and Longview Aluminum, hoping to preserve the BPA contracts, filed for bankruptcy.

Longview Aluminum Chairman Michael Lynch said the filing will give him time to reorganize the company and work out his differences with the BPA.

The BPA isn't convinced the bankruptcy prevents the agency from terminating the contracts and shutting off the power. A court hearing, initially set for Wednesday but rescheduled for today, will consider the issue.

While the legal spats continue, the workers have been left out in the cold, said leaders of the Longview Federated Aluminum Council and the United Steelworkers, which represent about 700 of the plant's more than 900 workers.

David Foster, a district director for the steelworkers union, said Longview Aluminum has made a mockery of contract negotiations and failed to present a single settlement proposal to workers.

"Their actions show contempt for the workers and indifference to their legal obligations, Foster said.

Gail Kinsey Hill: 503-221-8590, gailhill@news.oregonian.com


Corus<CS.L> results to put aluminium sale in focus

Reuters, 03.07.03, 10:20 AM ET

By Santosh Menon

LONDON, March 7 (Reuters) - Anglo-Dutch steel maker Corus Group Plc <CS.AS> will reveal wider losses when it reports 2002 results next week but analysts say the main interest will be in any news on the planned sale of the its aluminium assets.

"The earnings are going to be almost a side-event," said Charles Kernot, analyst at BNP Paribas, who is expecting an operating loss of around 400 million pounds ($640 million) in 2002. Corus reported an operating loss of 385 million in 2001.

Corus itself said last November that it was likely to post an operating loss before exceptionals of 152 million pounds in the second half, on top of a 252 million loss in the first half. "The most important thing will be the results of the McKinsey (management counsultancy) review and if the company has been able to change the minds of the Dutch employees and the Dutch supervisory board for approving the (aluminium) sale," said Kernot.

Corus, one of the world's top 10 steel producers, announced the sale of the aluminium unit to France's Pechiney for 750 million euros last October, but the deal has been rejected by its Dutch workers.

The workers say the firm's management has failed to meet some of its conditions for approval, including investment guarantees in the Dutch arm which originally owned the assets.

The deal is seen as vital to Corus, which could use the funds to pay down debt and renew a 1.2-billion pound loan facility that expires in January next year.

Jitters that Corus, which last November ditched a planned takeover of Brazilian steelmaker Companhia Siderurgia Nacional CSN (nyse: SID - news - people) <CSNA3.SA>, may not be able to go ahead with the aluminium deal has weighed heavily on Corus's shares.

The Corus share price has fallen 44 percent this year and on Friday was off a further three percent on the day at 15 pence.

The company, formed by the merger of British Steel and Dutch firm Hoogovens, has said it is committed to the deal and is working on internal approvals required to see it through.

PECHINEY WAITING

A Pechiney spokesman told Reuters on Tuesday that the French aluminium giant was also looking for greater clarity on the deal by the middle of March.

Analysts said they also expected Corus to give an indication on trading prospects for 2003, after it said last November that an anticipated market recovery would be slower than expected as demand for key products waned in the economic slowdown.

Corus struggled with weak steel prices and blast furnace disruptions last year, but analysts said a weakening pound and firmer steel prices may help this year.

"Steel prices have certainly increased this year, but don't forget there's still a very weak economy across Europe," said one analyst, who asked not to be identified.

Analysts also said they would be on alert for Corus announcing further job cuts in Britain.

Last month, the Financial Times reported that Corus planned to cut 1,500 jobs at its UK steel plants. The company called the report "speculative" but said it had appointed consulting firm McKinsey to help it devise a strategy.

Corus has announced more than 10,000 job losses from a workforce of 55,000 since its formation in 1999.

"But the most important and the most immediate thing for them to do is, I think, to get some cash into the bank from the sale of the aluminium business. That will determine what the share (price) is going to be," said BNP Paribas' Kernot.

Copyright 2003, Reuters News Service


Germany to cap green power subsidies paid by firms

Reuters AlertNet, UK 07 Mar 2003 14:36

(adds reaction of metal industry and date of new round of talks between ministries in paras 9-10)

by Nicholas Brautlecht

FRANKFURT, March 7 (Reuters) - Germany's environment and economy ministries have agreed to cap renewable energy subsidies paid by energy-intensive firms, a spokesman for the Green-party led environment ministry said on Friday.

"Last night the ministries have fundamentally agreed that contributions from energy-intensive companies will be capped and that will happen very soon," the spokesman told Reuters.

Discussions between the ministries now focused on the question of the need for a German electricity market regulator.

Industries such as aluminium producers have blamed the government's green energy policy for their high electricity costs, which they say makes them less globally competitive.

The environment ministry supports the case for a regulating authority. It believes high costs stem from the lack of electricty market competition, rather than subsidies for green power.

The establishment of a regulatory body would be a U-turn for the government, which so far has opted for negotiated rather than regulated access to power and gas networks. All other European Union energy markets are overseen by state regulators.

German electricity consumers pay above-market rates for power from renewable energy producers under laws promoting the sector. Their total contribution is expected to amount to around two billion euros ($2.19 billion) this year.

For the base metal industry alone, this means additional costs of up to 20,000 euros ($21,940) per worker, its WVM association has said.

WVM welcomed the ministries' decision and said the cap on subsidies should be speedily implemented.

"We expect and hope that the next round of talks between the ministries, which is scheduled for next Tuesday, will bring significant progress on the issue, such as a timeframe," Michael Engelhardt, responsible for WVM's energy politics, told Reuters.

The ministerial talks are part of a wider reform of Germany's extensive provisions for renewable power going into the general grid under the Renewable Energy Sources Act of March 2000 (EEG), which is due to be passed by the end of this year.

EEG recognises that renewable power is not yet fully cost-effective but sees it as politically desirable, because it is virtually free of greenhouse gas emissions, seen by many scientists as contributing to global warming.

Helped by EEG, power production from renewable energies rose by 18 percent to 45 billion kilowattt hours last year, the electricity industry association VDEW said in February.


HSE RESEARCH QUANTIFIES CANCER RISK FROM EXPOSURE TO PAHS

HSE press release E016:03 - 5 March 2003

The risk of getting lung or bladder cancer following occupational exposure to polycyclic aromatic hydrocarbons (PAHs) has been quantified for the first time, in a research report published by the Health and Safety Executive (HSE).

PAHs are a group of chemicals that are found in every industry, especially where substances are burned, such as in aluminium smelting and coke production. They are air-based and can be breathed in.

Exposure to PAHs has long been known to cause lung and bladder cancer, but, until now the overall risks had not been quantified.

This research report, commissioned by HSE, ‘Cancer risk following exposure to polycyclic aromatic hydrocarbons (PAHs): a meta-analysis’, found that people who are exposed to one microgram per metre cubed of PAHs through work over 40 years, are eight per cent more likely to contract lung cancer, i.e. their lung cancer risk increases from 80 per 1000 to 86 per 1000.

The results for the risks of contracting bladder cancer were less certain, due mainly to the much smaller number of cases of this rarer cancer.

John Thompson, Head of Chemicals Policy in HSE said: "This research will help HSE determine an occupational exposure limit for polycyclic aromatic hydrocarbons, which we will propose to the Health and Safety Commission’s (HSC) Advisory Committee on Toxic Substances (ACTS). If ACTS supports the proposal, HSC will hold a consultation exercise with stakeholders before approving the new limit."

Notes to Editors

1. This research was commissioned to inform the development of a Maximum Exposure Limit (MEL) for benzo (a) pyrene, a PAH which has been identified as a suitable marker for exposure to all PAHs of concern. MELs are set under the Control of Substances Hazardous to Health Regulations 2002 (COSHH). To comply with COSHH, exposure to hazardous substances should be reduced as far below the MEL as is reasonably practicable, and should not exceed the MEL when averaged over a specified reference period.

2. Commissioned by HSE, the work was carried out by researchers from the Environmental Epidemiology Unit at the London School of Hygiene and Tropical Medicine. They reviewed all the scientific papers that provided quantified risk estimates for lung and bladder cancer and combined the results from 39 separate groups of workers, to produce overall lung cancer and bladder cancer risk estimates. Exposure to one specific type of PAH, benzo (a) pyrene was used as a marker for total PAH exposure.

Copies of Cancer risk following exposure to polycyclic aromatic hydrocarbons (PAHs): a meta-analysis. Research Report 068, ISBN 07176 26040, price £15.00, are available from HSE Books, PO Box 1999, Sudbury, Suffolk, CO10 2WA, tel: 01787-881165 or fax: 01787-313995. Priced publications are also available from good booksellers.

HSE's Research Reports are available on the HSE website at www.hse.gov.uk/research/rrhtm/

PUBLIC ENQUIRIES: Call HSE's InfoLine, tel: 08701 545500, or write to: HSE Information Services, Caerphilly Business Park, Caerphilly CF83 3GG.

PRESS ENQUIRIES: Journalists only: 020 7717 6902. For press review copies telephone 020 7717 6904


Alcan increases stake in Aluminerie Alouette smelter to 40%

16 August 2002, in Business & Finance

Corus Group plc has agreed to sell its entire 20 per cent interest in the Aluminerie Alouette smelter in Sept-Iles, Quebec, to Alcan Inc. for $165m.

This transaction increases to 40 percent Alcan's stake in Alouette, which operates a 243,000-tonne, low-cost aluminium smelter.

The Alouette smelter entered into production in 1992. In addition to Corus, the equity partners in Aluminerie Alouette include Alcan (20%); Austria Metall AG (20%); Norsk Hydro (20%); Société générale de financement (13.33%); and Marubeni (6.67%).

Commenting on the sale, Tony Pedder, Chief Executive of Corus said: 'The sale of our interest in Alouette represents the first step in the divestment process of our aluminium businesses as announced in March this year, which will enable the Group to focus its activities on carbon steels. We expect to sell our remaining aluminium interests before the end of 2002 as scheduled.'

Completion of the transaction remains subject to the receipt of applicable regulatory approvals and is expected to be finalised by the end of September 2002.

BPA Clarifies Statement Concerning Longview Aluminum

Yahoo News, Friday March 7, 7:53 pm ET

PORTLAND, Ore., March 7 /PRNewswire/ -- In the March 6 issue of American Metal Market, a story by David Brooks quotes an unnamed "BPA spokesman," who was press officer Michael Hansen, as stating that Michael Lynch, principal of Longview Aluminum, "put $75 million in his own pocket..."

BPA would like to clarify this statement to avoid any misunderstanding. Neither Mr. Hansen nor anyone at BPA wished to state or imply that Mr. Lynch had personally "pocketed" money paid to Longview by BPA. Mr. Lynch is the Chairman and Managing Member of Longview Aluminum, LLC. References to Mr. Lynch in that sentence were intended as references to Longview Aluminum, LLC.

Not included in the story was the fact that BPA has conducted a review of Longview Aluminum's uses of $226 million BPA paid to the firm for not taking its contracted supply of power for a period of time. The review confirmed that Longview Aluminum's uses of the funds were in accord with its agreement with BPA.

Longview Aluminum Demands BPA Retraction

Friday March 7, 5:50 pm ET

BPA Audit Confirmed Appropriate Use of Power Buy-Back Proceeds

Chairman Lynch Sends Letter to BPA Executive Director Wright Terming Comments 'Libelous and Defamatory'

LONGVIEW, Wash., March 7 /PRNewswire/ -- Today Longview Aluminum Chairman Michael Lynch indicated that he has sent a formal request for retraction to Bonneville Power Administration (BPA) Executive Director Steven Wright following libelous and defamatory statements made by a BPA spokesperson regarding the company's use of the proceeds from its curtailment agreement with BPA. This agreement, crafted by BPA, was implemented to help the region meet its growing demand for power in the face of dwindling supply.

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Under the terms of this agreement, Longview Aluminum was compensated at one-half value in exchange for not taking its allocated supply of power, valued at $452 million. The company's use of the proceeds from this agreement, totaling approximately $226 million, were the subject of comments made in media interviews given by a BPA spokesperson over the past several days. The other one-half value of the proceeds from the unused Longview Aluminum power, valued at $226 million, was retained by BPA, which recouped these funds through sale of the power to other individual and corporate customers in the Pacific Northwest.

"Mr. Wright's comments are particularly offensive and puzzling given the fact that, in fall 2002, BPA itself conducted a full audit of Longview Aluminum which confirmed that we have fully complied with the curtailment agreement and its terms for how the proceeds could be spent," said Lynch.

Of the $226 million Longview Aluminum received for allowing BPA to sell the company's unused power on the open market, approximately $167.9 million was used to pay down the company's debt. Another $35.5 million was used to compensate Longview Aluminum's Steelworker work force with full salary (up to 40 hours per week) and benefits. Of all the aluminum companies negotiating such curtailment agreements with BPA, none were as extensive as Longview's in terms of worker compensation.

The remaining proceeds -- approximately $22.6 million -- were used to maintain the plant (an estimated $1 million per month or $13.1 million), to pay other expenses, including fees for professional services ($4 million) and to purchase BPA power and transmission ($3.2 million). The balance of approximately $2.3 million remains in reserve to support ongoing maintenance of the plant and other incidental expenses.

"BPA's energy policies and mismanagement of that agency have led to unnecessarily high energy prices that have been the catalyst for a deindustrialization of the region, resulting in massive job loss," said Lynch. "Rate-payers should demand that BPA account for its own use of the proceeds from our curtailment agreement."

Lynch emphasized that company officials remain committed to preserving their investment in Longview Aluminum, protecting its approximately 1,000 manufacturing jobs and contributing to the economic renewal of the region.

Earlier this week, Longview Aluminum officials filed a petition for voluntary Chapter 11 bankruptcy protection in Federal Court in Delaware and expressed intent to reorganize the company to safeguard its assets, including BPA-provided power and transmission rights.

Longview Aluminum is a high-purity aluminum smelting facility in Longview, Washington.

Nuclear power plant's outage costing BPA

Mid Columbia Tri City Herald, WA Friday, March 7th, 2003

By Chris Mulick Herald staff writer

The unplanned outage at the 1,150-megawatt nuclear power plant north of Richland enters its seventh day today at a time when its power could have bolstered the financially-strapped Bonneville Power Administration.

Wholesale power prices have rebounded in recent weeks because of surging natural gas prices.

Power costs hovered near 8 cents per kilowatt-hour Thursday at Northwest trading hubs, more than double a year ago.

That offers the BPA a chance to make up some financial ground by selling surplus power, but it hasn't had much to sell since the nuclear plant went down.

"It would be nice to be able to do that with prices being what they are," BPA spokesman Bill Murlin said.

The Columbia Generating Station remains idle pending repairs to a backup diesel generator, part of just one set of six backup sources that would supply energy to the plant's safety systems in an emergency.

All six are able to generate enough backup power on their own, but the multiple redundancies are built in for extra precaution.

It's not clear when the plant will restart.

"It'll be a matter of days," said Don McManman, a spokesman for Energy Northwest, the public power consortium that operates the plant.

The BPA, which buys the plant's power and sells most of the electricity distributed by Tri-City area utilities, is in a financial crunch in part because surplus power sales are far below what BPA anticipated.

It is planning for another rate increase this fall that would make its wholesale rates almost 70 percent higher than 18 months ago.

Last week, BPA Administrator Steve Wright said revenue from surplus sales has improved with the surging wholesale market but not enough to make a substantial impact on the agency's finances.

That's largely due to a dry fall and winter that has yielded less water than normal to spin turbines at federal dams.

The latest forecast predicts January through July runoff at the Dalles Dam at 73 percent of normal.

"We need a lot more inventory," Wright said.

BPA has been tapping more of that inventory since the nuclear plant went down, drafting more from Grand Coulee Dam.

That's not likely to have a great impact later this year because reservoirs were to be drawn down soon anyway for flood control, Murlin said.

VALCO should be realistic - J. H. Mensah

GhanaWeb, Ghana - 06 March 2003

Mr Joseph Henry Mensah, Senior Minister, on Wednesday said the Volta Aluminum Company (VALCO) would have to be realistic in its demands for lower electricity tariffs and other incentives specifically tailored for young industries.

"No country would subsidise electricity for a multi-national company for that long period of time when its own people pay so much after switching on a bulb"

The Senior Minister, who is also the Chairman of the Government's Economic Team, gave the side talk during a debate on the 2003 financial proposals of government in Parliament.

He said every one would have to learn to live in the present environment where power was no longer cheap and abundant.

The member said VALCO had enjoyed cheap power for far too long and that the time had come for the review of that incentive.

"VALCO was supposed to help us develop our bauxite fields to get a local supply base for alumina but for all this while, they had preferred importing all their raw material from Jamaica, Mr Mensah said.

He said government's stance on the issue had been misconstrued in the international power corridors and that was affecting the reputation of the country.

CEE markets mixed

Bluebull.com, UK - 07 Mar 2003

In Romania, BET-C decreased by 0.36%. Today’s performer was Sofert Bacau up 10.71%, while the loser was Policolor Bucharest down 9.46%. Alro Slatina, the Romanian aluminum producer, posted for last year a net profit of ROL 842.3 bln, down 41% y-o-y, but up ROL 44 bln compared to company’s initial estimations. The main shareholder of Alro is the consortium consisting in the British Marco Acquisions Ltd., the US Marco International Inc. and Conef Bucharest.

Corus is poised to sell off aluminium arm

icWales, UK Mar 10 2003

The Western Mail - The National Newspaper Of Wales

CORUS was reported to be locked in crisis talks over the weekend in an attempt to push through the long-planned £500m disposal of its aluminium business.

The steel group is said to need to sell the subsidiary - which has plants in Holland and Germany - to ease negotiations with its banks over the renewal of a £1.2bn loan.

It is hoping to sell the aluminium arm to French company Pechiney by the time it reports its results on Thursday.

However, it is suggested that Corus's banks - ABN Amro, HSBC, and Credit Suisse First Boston - have been pressing for evidence of progress on the deal.

The disposal of the aluminium business was agreed last October, but has been vigorously opposed by Dutch trade unions.

Corus's shares have slumped by around two thirds since it pulled out of a £2.8bn merger with Brazilian steelmaker CSN in November.

Analysts predict that Corus will announce an operating loss of £150m for the second half of its year.

German aluminium workers call for energy tax break

Planet Ark, NY GERMANY: March 10, 2003

HAMBURG - German workers in aluminium and other non-ferrous metals will attend a meeting last weekto demand a special tax break to reduce their industries' energy costs, trade unions said.

The industries and unions are lobbying the government to limit the surcharge they pay on electricity to support renewable energy. This is used to support increased use of environmentally friendly energy such as wind power.

"Without changes there is a medium-term threat to jobs especially in the aluminium industry but also in copper and zinc refineries," said a joint statement from trade unions IG Metall and IG BCE, which are organizing the protest meeting in Essen.

It said Germany's production of aluminium, copper and zinc production is under threat.

The unions said there were talks within the German government about providing a tax cut.

Several leading metal producers are also supporting the meeting, including Corus Aluminium, a German unit of British/Dutch metal group Corus.

Companies view the surcharge as an unfair burden on electricity intensive industries.

"This is strangling our industry," said Karlheinz Scherer, spokesman for the Corus Aluminium plant in Voerde.

"The renewable energy law alone generates additional costs of 14,000 euros a year per job for us. This is too much to compensate by increasing efficiency." He said the company and the German non-ferrous industry in general wants a ceiling on the surcharge companies pay.

"Encouraging renewable energy is certainly desirable but not at the cost of killing traditional industries," he added.

REUTERS NEWS SERVICE

Kumar Birla, Orissa CM Meet On Aluminium Projects Revival

Financial Express, India , Dilip Bisoi

Bhubaneswar, March 10: The meeting between Aditya Birla group chairman Kumar Mangalam Birla and Orissa chief minister Naveen Patnaik, held on Monday in Bhubaneswar, is likely to pave the way for the revival of the two major aluminium projects of the Birla group in the state. The two projects need a total investment of Rs 15,500 crore.

The Aditya Birla group is proposing to set up an integrated aluminium complex with an investment of Rs 11,000 crore and a 100 per cent export-oriented alumina refinery for Rs 4,500 crore in the state. However, both the projects are floundering because of various reasons.

At the meeting, Mr Birla reportedly explained the problems that are being faced by the company in putting up the projects.

He has been assured by the chief minister that all the hurdles would be removed, sources told FE.

The Utkal Alumina International Ltd (UAIL), a consortium led by Indal, is struggling hard to set up a 1 million tonne alumina refinery in Kashipur of Orissa’s Rayagada district.

Even though land has been acquired for the project, the plant is not coming up because of the resistance from local tribals who will be displaced if the project is allowed to be executed. They are also opposing mining of bauxite from the Baplimali mines allotted to UAIL on the ground that it would cause pollution in the area. The tribals have given a call for a protest rally on March 13.

Aditya Aluminium, a wholly-owned subsidiary of the Birla group, is planning to set up an aluminium complex with facilities for production of 1 million tonne alumina, 2.60 lakh tonne aluminium and a captive power plant of 630 MW at two locations in the state. While the refinery would be located near the Kodingamali-Potangi bauxite mines in Koraput district, the smelter and the captive power plant would be set up near the coal mines in Sambalpur district.

The project also faced problems due to resistance from the locals. The transfer of mines also caused problems, prompting the company’s board to shelve the project four years back.

Mr Birla told reporters, “Even though Nalco privatisation has slowed down, our options are still open.” He claimed that Nalco’s acquisition would not affect the company’s investment plans in the two aluminium projects as the Aditya Birla group was aiming at becoming a global player in the sector.

President and CEO of Indal SK Tamotia is going to meet the chief minister and top officials of the state government Tuesday to chalk out a strategy for the revival of the two projects.

Labour Office plans for massive layoffs

Slovak Spectator, Slovakia, Mar/10/2003

By Dewey Smolka

Spectator Staff

PRESSURED by deregulated energy prices and corporate restructuring, Slovak industries will be laying off large numbers of workers this year, say officials from the country's National Labour Office (NÚP).

While some of the redundancies stem from difficulties within individual companies, job losses are also expected because of restructuring at recently privatised and profitable firms. Analysts, however, say that employment levels on the whole will rise this year as the country's service sector continues to develop.

Although the layoffs have not started yet, the NÚP says around 20,000 employees are expected to lose their jobs. Slovakia's current labour law requires that companies planning layoffs clear the reductions with the NÚP and give eliminated workers two months' notice.

"In January, more than 1,200 people from 25 firms lost their jobs in this way," states a press release from the NÚP.

State-owned railway network operator ŽSR says it is planning up to 5,000 redundancies over the next four years, as it works to reduce ballooning debt and overcome the costs of January's three-day rail strike.

State-run Slovak Television (STV) is also planning layoffs to cut costs and bring the haemorrhaging station back to profitability by the end of this year.

However, reductions are not limited to debt-ridden state giants.

Mass layoffs also threaten workers at the Závod SNP (ZSNP) aluminium smelter in central Slovakia's Žiar nad Hronom, privatised last year on condition that the buyer, Žiarska hutnícka spoločcnosťt (ŽHS) backed by corporate raiders Penta Group, invest nearly Sk1 billion (24 million euro) into the company through 2006.

Although the sale contract required that ZSNP's buyer plan to maintain the current employment level of over 3,700, the company has already handed out 434 notices, and more have not been ruled out.

Profitable firms sold off in recent years are also planning cuts, as the former state monopolies restructure under outside management.

The new owners of regional energy distribution firms ZSE and SSE, Germany's E.ON and France's EdF, say they plan to cut their respective workforces by up to 10 per cent over the coming years.

Former gas monopoly SPP, sold early last year to a French-German consortium, is also planning reductions. However, SPP officials say they will reduce worker numbers by not replacing outgoing retirees.

"At our company, there is a natural decline in employment. The older [workers] will go on pensions and we will not employ others to take their places," said SPP spokesperson Dana Krsáková.

"Right now we are going through restructuring, and future employment developments will depend on the results of that," she said.

Despite the bad news, economists say that downsizing is the necessary result of communist-era overcapacity, and that cuts in worker numbers will be accompanied by a rise in worker productivity - a required development as price controls are eased ahead of EU accession.

"In former state firms, there was overemployment, and the trend should go towards a reduction of positions and an increase in pay for the remaining employees, because their productivity will rise," said Ján Tóth, senior analyst with ING bank.

"A reduction in the number of employees in less profitable firms could also be related to increasing input costs, which puts pressure on labour productivity. But the economy as a whole is for now showing record growth in employment in the private sector," said Tóth.

Unemployment remains one of Slovakia's most pressing economic problems. January figures from the NÚP show that 17.7 per cent of the population is out of work and ready to take a job. While this is down from 19.7 per cent in January 2002, the figure remains among the highest jobless rates of the 10 EU candidate states.

While mass layoffs will exacerbate unemployment problems in some regions and sectors, Tóth says that employment growth in other areas will allay some of the damage, and reduce jobless figures overall by the end of the year.

"This year there will be more pressure on employment growth, because domestic demand in general is not very high," said Tóth.

"I am not predicting a growth in unemployment, but a continuing decline. The number of unfilled work positions is now quite high compared to previous years," he said.


INTERVIEW: World Aluminum Mkt Balanced Next 5 Yrs -Noble

Yahoo News, Wednesday March 12, 10:32 AM

By Chanyaporn Chanjaroen

Singapore, March 12 (OsterDowJones) - The world aluminum market will find "a natural equilibrium" between production and consumption in the next five years because of possible closure of several Western production facilities, an executive of trading company Noble Resources said in a recent interview.

Global aluminum supply exceeded demand by over 600,000 metric tons each year in 2001 and 2002 following China's rapid expansion in production capacity.

"The disparity in the cost of production in (countries such as the U.S. and Europe) to such countries as Australia, China and South Africa is too wide to be sustained long term," said Philip Gross, who heads Noble's global aluminum trading division in London.

In the next five years, Gross expects "large shutdowns in North America and Europe given that the world's industrial base is no longer viable in those regions due to (high) costs and environmental issues."

On the other hand, the currently strong consumption growth will continue, driven mostly by good demand for aluminum from a robust automotive industry, Gross said.

Turning to the U.S. market which Noble entered this year, Gross said the market continues to move at a steady pace.

"What is lacking currently is the consumer confidence to move the economy to the next level. I do not see this situation improving until there is more clarification and resolution of the world conflicts taking place at the moment. The threat of war is not as damaging to growth as the indecision that is preceding it," Gross said.

In 2002, primary aluminum consumption in the U.S. rose by nearly 7% on year to around 6 million tons, but the recovery didn't fully make up for the decline of 12% to 5.6 million tons in 2001. The U.S. is the world's largest aluminum user.

Aluminum trading is one of the flagship businesses of Noble Resources, owned by Hong Kong-based and Singapore-listed Noble Group Ltd. The company trades aluminum of both Western and Chinese origins.

China's Expanded Production Capacity Factored In

The market has already factored in China's expanded capacity into current prices, Gross said, adding the robust production capacity expansion in China in the past few years is now slowing down amid weakening aluminum prices and higher alumina and energy costs.

World aluminum prices dipped in 2001 and 2002, weighed down by the dramatic rise in supply from China. This year, Chinese aluminum producers are likely to add 1 million tons of new production capacity, with this year's total capacity to hit around 5.3 million tons.

"The Chinese have been very keen to add production potlines so long as the energy prices and raw materials costs were below a certain level. Currently, (costs) have exceeded these levels and (that) will be the true test (of) their commitment to expansion," Gross said.

Alumina prices have been rising since the second half of last year, boosted by growing demand from China. "China relies heavily on imported (fuel) and alumina and with current world prices, they may find their zealous expansion too ambitious," Gross said.

China's rising aluminum output hasn't yet translated into an instant rise in the popularity of Chinese aluminum brands. Users in major consuming countries such as the U.S. and Japan still prefer Good Western brands, which are believed to have superior quality over the Chinese brands.

Good Western brands include those produced in the U.S., South Africa, Australia, Canada, Brazil and New Zealand.

"That is still the case, although I anticipate this trend changing in the future," Gross said.

He cited the case of Russian aluminum, which wasn't well-received in the U.S. market in the early '90s. But eventually Russian aluminum was found to be of comparable quality and now trades at the same premium levels as the domestic p1020 brand in the U.S. market.

In some highly specialized applications, the quality issue doesn't really exist but there is a brand name issue, Gross said.

"Chinese aluminum today is probably as good as any (produced elsewhere) and a lot of it is now registered with the London Metal Exchange. Eventually the market will come to accept that fact," Gross said.

Noble is planning to add more nonferrous metals into its trading business, but hasn't decided which metals to add, Gross said.

"We are looking at the whole spectrum. Copper is the second largest in (trading) liquidity after aluminum, so (adding copper) would be logical."

Chanyaporn Chanjaroen, OsterDowJones, 65-6415-4082; cchanjaroen@osterdowjones.com


Corus asset-stripp

icWales, UK, Mar 12 2003ing feared

Kirsty Buchanan, James Pritchard And Robin Turner, The Western Mail - The National Newspaper Of Wales

CLAIMS that Corus's Dutch parent company could be "asset-stripping" the steel maker were denied last night by the Government.

Trade and Industry Secretary Patricia Hewitt was asked by Lord Morris, the former Aberavon MP, in whose old constituency the threatened Port Talbot steel works are situated, what support the Government would offer if the Hoogavens arm of Corus was clearing out its UK operation.

Ms Hewitt said, "I don't believe that is where we are going to be. The most important thing we can do is to support all the efforts they are making to ensure they come through their present financial difficulties.

"If that goes wrong we will have to look again at what we can do to support the industry and the workers."

Carmarthen East and Dinefwr MP Adam Price, vice-chairman of the All Party Parliamentary Steel Group, said he would be tabling a question calling for a statement from Ms Hewitt on her crisis talks with Corus.

He said, "This situation is moving fast and we need to know what the DTI is doing to stave off job losses."

Corus is involved in a bitter internal row over the proposed 750 million euro (£543m) sale of its aluminum division.

The UK arm of Anglo-Dutch Corus was relying on the sale to make inroads into its £1bn debt mountain, but the Dutch board is worried about the sell-off of its profitable assets to prop up the loss-making British operation.

The Dutch arm of Corus is expected to announce profits of more than £150m for last year.

Mr Price described the board-room battles inside the Anglo-Dutch giant as bizarre and said the merger between the former British Steel and Dutch giant Hoogovens had proved a "merger made in hell" for Welsh steel workers.

In further bad news for the Port Talbot plant, experienced staff there say its huge deep-water harbour, officially opened by the Queen in 1970 and once hailed as the saviour of the works, has now become a giant albatross.

When Port Talbot's sister plant at Llanwern was also producing steel, it paid 40% of the cost of maintaining the vast docks, which have been deepened still further in recent years to take in "super-carrier" ships.

But when the "heavy end" of the Llanwern plant was closed in 2001 with the loss of 1,300 jobs, leaving the plant to concentrate on rolling steel only, the total cost of dock maintenance fell on the Port Talbot plant.

Welsh Secretary Peter Hain, the Neath MP, said he believed investment in the new blast furnace at Port Talbot should ensure the survival of the plant - but refused to rule out another devastating round of job losses.

And although steel experts agreed with Mr Hain, Jo Clarke of the Metal Bulletin magazine, said that while Port Talbot looked safe for now it was difficult to second guess what plans Corus might have.

"The investment in the blast furnace at Port Talbot must mean the company feels the plant has a future, but an announcement like this is understandably going to worry the workers.

She added, "The simple fact of the matter at the moment is that Corus is not able to sell its UK steel in Europe because the pound is so strong against the euro and when that is combined to the loss of capital from the sale of the aluminum business, this is the result you end up with."

The company blamed the 2001 job cuts, totalling 6,000 across the UK, on the difficult exporting market caused by sterling being too strong against the euro. Ironically, yesterday's announcement came as the pound fell to a four-year low against the euro.

Bill Morris, the general secretary of the Transport and General Workers Union, said it was essential Corus discuss the matter with the unions. "The announcement is bad news but we remind the company that they are obliged to enter into meaningful consultations with us," he said.

And SteelAction, a group of 18 local authorities in steel areas, said at an emergency meeting in London that further cuts would "severely undermine" the capacity of what was still a strategic industry, vital to the nation's economy.

Chairman Roger Stone said, "The announcement creates further uncertainty in steel communities and among workers already reeling from earlier, massive cuts.

"The Government has to decide whether it is serious about maintaining steel as a core British manufacturing industry.

"Further cuts in Corus will leave the UK's industrial policy in tatters."

Corus said that yesterday's announcement had been forced by the decision of its supervisory board in the Netherlands to block plans for the £543m sale of two aluminum businesses.

The sale of the two aluminum businesses, with operations in Germany, Belgium, Canada and China, to French firm Pechiney, was announced in October and formed part of a plan by Corus to focus on carbon steel.

With the money generated by the deal Corus said it planned to finance a modernisation of the UK steel operation.

However, failure to complete the deal will mean the group has to look afresh for financing from equity and debt providers.

Port Talbot escaped largely unscathed from the 2001 cutbacks which proved so devastating to communities in Llanwern, Ebbw Vale, Bryngwyn and Shotton. Although logic would also seem to spare Port Talbot from closure now, some politicians have warned that "nothing can be ruled out" at this stage.

The company currently employs around 10,000 people in Wales, with 4,000 at Port Talbot.


Howmet calls back laid-off workers

MLive.com, MITuesday, March 11, 2003

By Dave Alexander

Chronicle Business Editor

Howmet Castings is calling back hundreds of its laid-off workers, an indication of better times ahead for Muskegon County's largest employer and a bright sign in these relatively gloomy economic times.

The callbacks at the Alcoa company in Whitehall began late in December as orders came in for non-military jet engine parts and then for the United States government's new Joint Strike Force fighter, according to Amy Heisser, human resources director for the Whitehall operations.

Through February, the callbacks had been about 200, Heisser said. Another 100 were called back last week, Heisser said, including both union production hourly workers and salaried technicians.

With the recent increase in employment, Howmet will have roughly 2,000 workers at the various facilities in Whitehall. Howmet, an investment casting manufacturer of internal turbine engine parts, is the largest employer in Muskegon County.

Employment shrank to about 1,750 in the last quarter of 2002 before the callbacks began, Heisser said. Parent company Alcoa -- the huge aluminum manufacturer headquartered in Pittsburgh -- went through a three-month reorganization of its aerospace and commercial transportation group that included Howmet.

The reorganization through last October brought about a reduction of about 25 percent of the Howmet Whitehall workers. Many of the layoffs were white-collar professionals and technical staff. Most of the management staff worked in Howmet's Operhall Research Center and plant operations.

Over the summer, productions workers who were members of United Auto Workers Local 1243 also were put on layoff status. The layoff list now sits at about 175 workers in the casting divisions.

The company's aerospace parts were hurt by the major downturn in the airline industry; commercial carriers have been in financial difficulty since the Sept. 11 terrorists attacks. On the energy side of the business, power companies have been delaying new orders for gas turbine generators in light of the financial crisis and scandals with power-trading companies like Enron Corp.

Howmet recently reached new agreements with aircraft engine manufacturers Pratt & Whitney and Pratt & Whitney of Canada. The slight increase in non-military, commercial airline business and parts for the Joint Strike Force jet fighter should mean business for Whitehall casting plants 1, 3 and 10, Heisser said.

"The pull for our business is up; sales are extremely strong," Heisser said.

Howmet is working with Pratt & Whitney in providing parts for the F-119 engine that will go into both the Air Force F-22 Raptor and the Joint Strike Force jet fighter.

Now under production, the F-22 Raptor is a joint Lockheed Martin/Boeing venture, producing a new air-superiority fighter aircraft to replace the F-15. The Joint Strike Fighter is still in the development stage as the military looks to replace the multi-role F-16 fighter.

Meanwhile, Howmet's Thermatech coating business will be boosted by consolidation with operations from Brandford, Conn., where a plant will close or be sold. The consolidation of Thermatech operations in Whitehall should bring an additional 15-20 jobs here, Heisser said.

© 2003 Muskegon Chronicle. Used with permission


ALBA highlights strategy for environmental protection

AME Info, United Arab Emirates March 11th, 2003 at 12:15

Aluminium Bahrain (ALBA) recently held a number of meetings with some of its neighbouring industries, to discuss the upcoming construction activities of the Line 5 Project and the measures that will be implemented to ensure minimum disturbance and the least hindrance to the environment.

The initiation of the construction of Pot line 5.

Manama, Bahrain

The meetings provided ALBA with the opportunity to present the concerned parties with the strategies that will be implemented to mitigate the industrial and environmental effects during the construction of potline 5.

Having received highly prestigious environmental awards over the years, ALBA has had an excellent environmental record while meeting the current legislation. The Line 5 Project has taken yet another step forward towards reinforcing ALBA's responsibility in protecting the environment and preventing any inconvenience to surrounding industries through the preparation of an Environmental Impact Assessment (EAI) report which highlights all the environmental aspects of the project and underlines the feasible and cost-effective solutions to eliminating potential environmental and social impacts.

According to Niall O'Byrne, General Manager of the Line 5 Project, "ALBA has always been an environmentally-aware organization, and the awards we have received in the past demonstrate our commitment. We reinforced this commitment on World Environment Day last year by stating that the Environment will be one of our five key performance areas through which we will judge the company's success. For this precise reason, we have taken exceptional measures to ensure that any damaging factors such as high noise levels, industrial emissions, traffic congestion and the excess release of dust during the construction period are well controlled. "

The presentation conducted during the meetings by the ALBA representatives, provided the attendees with a general overview of the Line 5 Project followed by a schedule of the on-site activities that are to take place following the initiation of the Line 5 construction. The presentation also focused on the issues of the new proposed routes for traffic, the equipment to be used during construction so as to ensure maximum safety as well as the mitigation strategies that will be implemented during the construction period so as to prevent any harm to both the environment and the surrounding industries.

ALBA's existing potlines 1, 2, 3 and 4 currently better the emission standards required by Bahrain statute and are in-line with those of other international smelters. Since 2000, ALBA has implemented the ISO 14001 Environmental Management System. In 2000, the United Nations Environmental Programme (UNEP) awarded the company the International Millennium Business Award for Environmental Achievement, one of only twelve countries in the world to receive this accolade.

For further information, please contact

Irene Karamitsou

Promoseven PR,

Tel: (+973) 225148

Fax: (+973) 229661

Alba - Aluminium Bahrain B.S.C (c) - is a 520,000 tonnes per annum aluminium smelter. As well as its reduction lines and casthouses, the company has a dedicated carbon department and a 1500MW power plant. A 450,000 tonnes per annum coke calcining plant is also in operation at the company's marine terminal. The company was officially opened in 1971 and its shareholders today are the Government of Bahrain (77%), SABIC Industrial Investments (20%) and Breton Investments (3%). The entire plant operates to the Environmental Management System standard ISO14001 and the Casthouses and Marketing are also operating to the ISO 9002 Quality Management System. The company has won a number of awards including the inaugural Shaikh Khalifa bin Salman Al Khalifa Award for Industrial Excellence, the International Millennium Business Award for Environmental Achievement and a GCC-wide award for Human Resources Development and nationalisation of the workforce.

ALBA's Line 5 Expansion, due for completion in February 2005 will expand ALBA's annual production by a further 307,000 tonnes per annum, making it the largest smelter in the world outside of eastern Europe. At a total cost of US $ 1.7 billion, the expansion will include a new power station, carbon, casthouse and other facilities


Siemens Sales to RusAl

Moscow Times, Russia, Wednesday, Mar. 12, 2003. Page 6

MOSCOW (MT) -- Germany's Siemens AG will sell 4 million euros ($4.4 million) worth of foil-making equipment to Armenia's aluminum producer Armenal, a unit of Russian Aluminum, Dow Jones reported Tuesday.

Siemens will supply the equipment over three years. Armenal and Siemens also plan to cooperate in the construction of electric control cabinets to be used in RusAl plants.


Study offers hope for Mead smelter

Kaiser, union, Washington state commissioned cost analysis

Spokesman-Review, Wednesday, March 12, 2003

John Stucke

Staff writer

Collaboration between warring factions may be the best chance to restart the shuttered Mead smelter.

Kaiser Aluminum Corp., Steelworkers, and the state of Washington commissioned a joint study that concludes the Mead facility could be reopened.

"It's a long shot," said Steelworker head steward Wayne Bentz, "but it's better than nothing."

The findings will be released Thursday in Seattle by author Robin Adams, an independent analyst with Resource Strategies, a part of the CRU Group.

At its core, the study states that government action can help the smelter operate.

Kaiser and officials with the Washington State Department of Community, Trade and Economic Development with knowledge of the study were unavailable to comment Tuesday.

There are several major hurdles to reopening the smelter. They include the availability of affordable electricity, weighty environmental cleanup requirements, depressed aluminum prices and labor contracts.

Whether the smelter can operate under Kaiser or perhaps another company or investment group is debatable.

Kaiser filed for Chapter 11 bankruptcy protection 13 months ago with $3.1 billion in liabilities. It has largely withdrawn from the primary aluminum business.

Its Tacoma smelter was sold as scrap for about $12 million in December. Mead has been indefinitely closed, with about five employees overseeing security and the most basic upkeep. Kaiser's smelter in Ghana has been severely curtailed in an ongoing electricity struggle with the African nation's government.

In January, Kaiser announced its executive vice president in charge of the smelter group was resigning, with his duties absorbed by CEO Jack Hockema.

If the company were to sell the plant, it would need to shed at least a portion of its environmental problems at Mead, said two former Kaiser executives who requested anonymity.

For decades the smelter was a piece of Kaiser's twin Spokane presence along with the Trentwood rolling mill. It employed more than a thousand workers and sent a vigorous economic pulse through north Spokane.

Now the 1,200-acre property is a Superfund site with cleanup costs estimated at more than $20 million. For decades, workers dumped old potliners behind the plant that eventually leached into the soil.

Any buyer would need plenty of cash and backbone.

Making money on aluminum is risky, especially with a smelter built during World War II.

To do it would require waiting for metal prices to rise and electricity prices to fall. With such patience elusive among investors, Mead continues to sit.

Bentz, who had been briefed on the study, acknowledged the plant's vast electricity needs would have to be met with new and creative contracts. Called interruptible power, the contracts would allow energy providers to quit delivering electricity to the smelter if needed elsewhere.

Such contracts are cheaper than traditional power deals, but companies may be switched off during profitable periods.

"That would be far different," Bentz said, "in that at a moment's notice, we could be throttled back or shut down."

Reached Tuesday, the study's author declined to elaborate on the findings. Adams did say that the work was mostly done last fall.

"This was done as a pre-feasibility study as to whether there was any real possibility of ever reopening these plants again," Adams said.

The collaboration is unusual. Steelworkers have battled Kaiser for years, culminating in a devastating labor lockout from 1998 to 2000. For any Mead restart, the existing labor contract would have to be retooled.

Because of its age, Mead requires more workers to make less metal than bigger, new plants.

Such drawbacks may require labor concessions that give Kaiser or another owner more flexibility.

Another obstacle is political.

Any state incentive awarded to Kaiser may draw scorn. The company owes at least $2.2 million in taxes to Spokane County.

The financially troubled Bonneville Power Administration has a $70 million claim filed against Kaiser in federal bankruptcy court.

Despite the doubts, any hint that the smelter could be restarted is welcome news.

"We know it wouldn't be simple," Bentz said. "But in a nutshell, what's there to lose?"


CFAC cuts production again

By Dave Reese

The Daily Inter Lake

Columbia Falls Aluminum Co. announced Tuesday it was laying off 175 people and curtailing 67 percent of its operations because of poor market conditions.

The layoff will begin Sunday, according to Haley Beaudry, external affairs officer for CFAC.

The aluminum company, which employs 340 people, manufactures aluminum from alumina. Beaudry said rapidly expanding production of aluminum in China is sending alumina prices skyward because of increased demand. That, along with high energy prices and a low-water year that spells trouble for hydropower, convinced CFAC officials to shut down two of its three operating potlines.

"It's like a perfect storm has hit us in the economy," Beaudry said. "The price of power is up, and it's not looking good with low water."

The price of alumina has doubled in the last month, according to Beaudry. "The Chinese have put such demand on the stuff it has made the market go crazy," he said. China produced 2.8 million tons of aluminum in 2000. That increased to 4.3 million tons last year, and this year could go to 5.1 million tons.

At full capacity, Columbia Falls Aluminum has five potlines and produces about 160,000 tons of aluminum a year. Because of turmoil in the electricity market in 2000-2001, the company decided to temporarily sell its power on the open market rather than produce aluminum.

In September 2000 it shut down one line. Another decision was announced in December 2000 to shut another 1 1/2 potlines. Then in January 2001 it laid off 245 workers and closed the plant, but kept a skeleton staff on hand to perform maintenance until the power market stabilized. The laid-off employees enjoyed full pay and benefits through 2001.

Then in March 2002, CFAC announced the restart of one potline, and by June had three of its five potlines running.

After this Sunday, the Columbia Falls company will keep one potline running in order to work on new operating procedures and "retain the talent that we have out here," Beaudry said.

Workers affected by the layoffs did not receive their pink slips yet, and Beaudry said it was not known what the severance packages would be.

He doesn't expect the alumina or power markets to stabilize soon. If it were a short-term market challenge, they'd keep the plant open, he said. "But we think it's going to take more than a couple of months to get things back in order," Beaudry said.

On the other hand, "the price of raw material can't remain that high compared to the price of the finished product for very long."

CFAC began operation in 1955. The shutdown in 2001 was the first time the entire facility had been idled. Glencore International acquired the plant in 1999.

Reporter Dave Reese may be reached at 758-4438 or via e-mail at dreese@dailyinterlake.com


Nordural hopes to double smelting capacity by 2006

Planet Ark, NY, DENMARK: March 13, 2003

COPENHAGEN - Icelandic aluminium producer Nordural may double smelting capacity by the beginning of 2006 if it can obtain alumina and other raw materials at an acceptable price, a Nordural official said.

Nordural, or Nordic Aluminium, a subsidiary of private-owned U.S. Columbia Ventures Corp., had hoped to boost capacity to 180,000 tonnes a year by the beginning of 2005, but plans were delayed for a year due to a government ruling in February that changed its expected power supply arrangement.

National power producer Landsvirkjun, which is to provide 47 percent of the power needed for the expansion, said it could probably begin distribution by the end of 2005, and reach full power production in the beginning of 2006, despite the government ruling.

But Ragnar Gudmundsson, Nordural's manager of finance of administration, told Reuters that it would take the company four to six months to find out if it could double its smelting capacity by 2006.

"We can't decide whether to continue until we have found the alumina and anodes we need for the expansion, at acceptable prices," Gudmundsson said. "We haven't been able to negotiate raw material prices until now because of the uncertainty about the power supply."

Power for the increased production was orginally to have come from a new 70 MW hydropower facility at Landsvirkjun, which planned to build a dam in the Icelandic highlands and inundate 29 square kilometres to build a reservoir.

Those plans were scrapped in February by the Icelandic government, however, which allowed only for a reservoir of three square kilometres to save a nearby nature reserve.

Iceland has been courted by many aluminium producers in the past few years, mostly because of relatively low prices on hydropower and economic and political stability in the country.

However, the increase in heavy industry has caused controversy because of environmental damage.


Corus in court to save sale key to survival

Reuters, UK Wed March 12, 2003 01:37 AM ET

By Otti Thomas

AMSTERDAM, March 12 (Reuters) - The future of Anglo-Dutch metals group Corus CS.AS hangs in the balance as it awaits a ruling on a divestment dispute that saw its management take its Dutch supervisory board to court on Wednesday.

Corus management, seeking to force the sale of its aluminium operations so it can pay its debts, filed a request before the Dutch Enterprise Chamber of the Amsterdam Court after the supervisory board rejected the planned deal on Tuesday.

The sale of the aluminium operations to France's Pechiney PECH.PA is viewed as key to the survival of Corus and news the deal was in jeopardy slammed the group's shares on Tuesday, wiping off half of its market value.

The setback in the aluminium sale comes five months after Corus was forced to ditch a planned takeover of Brazilian steelmaker Companhia Siderurgia Nacional CSN SID.N CSNA3.SA .

The hearing is due to start at 0830 GMT. The ruling is binding but parties can appeal to the Dutch Supreme Court.

A spokeswoman for the Enterprise Chamber said there was no date set for a ruling but Corus said it expects a decision on Thursday.

Corus said its Dutch supervisory board had behaved "irresponsibly and unreasonably" in rejecting the 750 million euro ($828 million) sale of its aluminium rolled products and extrusion businesses, agreed last October.

Supervisory boards are supreme under Dutch law with powers to oversee management policy, share issues and disposals. The boards ensure management decisions are in the best interests of stakeholders.

MANAGEMENT OVERRULED

In rejecting the Pechiney deal, Corus's Dutch supervisory board overruled local management.

That decision followed a similar rejection by Corus's Dutch workers. Most of the assets being sold are in the Netherlands, and workers there want the proceeds to be reinvested in the firm's Dutch operations.

Corus was created through the merger in October 1999 of Dutch firm Hoogovens and British Steel.

The firm said on Tuesday it was looking at capacity cuts and plant closures to stem losses from its British steel-making business.

Corus has already announced plans to cut more than 12,000 jobs including some 10,000 in Britain, sold businesses and shut plants as it struggles to stay competitive in a depressed steel market.

The question mark over the sale threatens Corus's negotiations with its bankers to renew a 1.2 billion pound ($1.91 billion) loan facility that expires next January.

The firm said it was now looking to extend the existing banking arrangements until the end of May 2004 and discussions were under way to renew the facilities over the medium term.

Corus's existing loan was arranged by ABN AMRO, CSFB and HSBC, and had a tough time in syndication in 2001, when the company was still investment grade. The lead arrangers were left overexposed at the end of syndication.

Banking sources said Corus would find it difficult and very expensive to renew its credit lines, unless it reduces debt. But as with many other troubled credits in Europe, banks know that if they do not support it, they risk adding to the firm's woes.


Surviving Information Overload

Industry Week By Tonya Vinas

Successful companies focus on strategic data, invest wisely in a limited number of technologies and build appropriate data streams.

Information is to today's manufacturing executives what fire was to prehistoric cavemen. Properly controlled and applied, it sustains life and perpetuates evolution. But mishandle or neglect it, and it can quickly destroy.

This modern paradigm becomes more precarious each day, as increasingly faster and more powerful information pathways carry burgeoning torrents of data to the computers, wireless devices, telephones and desks of manufacturing executives. The secrets to competitive advantage lie in this flood of data but so do the possibilities for many missteps. It's easy -- frighteningly easy -- to become overwhelmed and miss critical cues, get bogged down in data that is irrelevant or has limited ROI for one's time, or fail to move the information into the hands of team members prepared to respond to it.

Effective management of information, from entry points to execution, has become absolutely essential for sustained competitiveness in business. This goes beyond hiring a whiz-bang CIO and signing off on IT projects. Companies that have developed best practices in information management and are reaping the benefits have:

Determined and communicated key performance indicators and aligned processes to support them.

Selectively invested in a limited number of technologies that drive efficiency in those processes by effectively moving information.

Built staffs with the proper skills and knowledge to respond to that information.

Structured management to encourage decision-making and continual learning at all levels.

"The companies that can become most adept at handling these large amounts of information are the ones that are going to be able to create a little bit of an edge for themselves," says Bo Foster, manager of corporate systems and e-commerce, for Alcan Aluminum Corp., Cleveland, a subsidiary of $12.5 billion Alcan Inc., Montreal. "Information has always been valuable. I don't think it's any more valuable today, but I think what's happening today is that people are able to see the information much quicker and respond much quicker. People who aren't going to be able to respond quickly to that information . . . their business practices are going to be slowly marginalized. It's not going to make you go out of business tomorrow, but you are a little less nimble."

Savings First

One of the most profound effects of proper information management is reduced costs -- immediate and long-term. Logistics and purchasing are two areas where manufacturers have reaped abundantly.

Alcan, which collects and recycles 20 billion-plus aluminum cans each year, has tripled its volume of pick-ups and deliveries in the past few years with no increase in staff. "We've done it all through business processes and the right use of technology," Foster says. Using Web-based tools, the company built a collaborative Internet site that logistics providers and Alcan logistics staff use for more efficient, up-to-date communication regarding movement, processing and delivery of the aluminum. "We're actually going beyond that," Foster continues. "We're going to create a new payment process . . . to ask these people to no longer submit freight bills to us. Since we already know the price and rate for that traffic movement lane, we're going to pay them automatically."

Alcan also built a freight database that its logistics group uses to reduce the number of carriers and secure lower freight rates. The Internet site, the database and a new RFP to carriers are combining to save the company $12 million annually in logistics costs.

"The best practice [of information management] is the business people and the IT people working together to achieve the business goal."

Logistics also has been an area of savings for $13.8 billion technology and engineering company Emerson, according to Charles Peters, senior executive vice president. Last year the St. Louis-based company centralized its logistics management, which historically had been handled independently by about 50 divisions. Peters says that approach generated thousands of origins and destinations in a very fragmented transportation network.

"Our new approach allows multiple divisions to share real-time information about transportation requirements, allowing operations to be consolidated into a common logistics management system," he says. "To-date, our new Hub System has saved Emerson approximately $20 million with the potential of saving a total of $150 million."

Emerson also has saved more than $100 million over five years by consolidating materials purchases with the Emerson's Materials Information Network (MIN) -- a common database that amalgamates purchases from 1,000 Emerson locations into a common format that can be tracked and analyzed. Centralized commodity management teams use MIN to work with suppliers in cross-divisional relationships. "This represents the first time we have been able to truly and effectively manage our supplier base from a companywide perspective," Peters says.

Factory Floor Challenges

It's not just large companies such as Emerson and Alcan that need to master information management to remain competitive, small and midsize manufacturers must achieve it as well. John Hayes knows this. Eighteen months ago he joined Chicago-based Republic Windows & Doors as CIO. The $80.1 million company manufactures custom windows and doors for commercial and residential construction and remodeling.

Before focusing on information management improvements, the company wisely improved its production processes, implementing a lean manufacturing system that more than doubled turnaround times, cut floor space in half and slashed defects. Now Hayes is working with Oracle Corp. on an IT systems upgrade.

"The market is complex enough that having silos of information has been a problem for us because of the time it takes to access information," Hayes says. "By the time you gather the information, it's past the time when you should have made a decision. Our strategy is to move that into an integrated environment in which we can establish the relationship between information generated from different sources so that we will have an easier time analyzing it.

Down the road, Hayes envisions using terminals on the factory floor that would display job-specific information. This could be a crucial time and money saver because each door or window the company produces is customized. Right now, production workers use binders with paper instructions inserted. Hayes says electronic delivery of information will reduce errors and make it easier to communicate precise specifications.

"The cost of remaking a window is a significant cost. If somebody makes a mistake, we catch it at the next station. But that happens more frequently than we would like. We would like to make the information more specific to what they are working on."

Hayes says eventually, the company will offer customizable Web-based portal pages to managers. For production workers, his long-term plans include strategically placing computer kiosks in common-use areas. "Our goal is to make the exchange of information a part of doing business as opposed to something that needs to be managed and controlled."

In The Toolbox

Alcan's Foster says that when choosing information-management tools, his company concentrates on matching appropriate technology to business processes. The company's intranet has been a crucial and relatively inexpensive way to disburse information, and it is now evolving to include more customized portals for individual business groups.

"We try to keep our IT investments low by concentrating on just a few tools," he says.

On the receiving end, Alcan uses database technology to aggregate incoming information then applies Cognos performance measurement tools to analyze it and make business decisions. Foster says that's the information-management power play: aggregate, analyze then act.

"Once you create these findings out of the information, you have to be able to classify, to do a triage: Is it something I have deal with quickly? Or does it go on a rainy day list? And then, get it out in front of the appropriate management."

A good example of this dynamic is Republic's method for making design decisions and seasonal staffing adjustments.

Hayes says the custom window and door business is heavily dependent on construction and home remodeling. So the company tracks government statistics related to these, has regular meetings with customers and constantly collects information gathered on calls. All of this is then placed into a database and/or spreadsheet program and reviewed in detail by geographic region.

"We look at, 'What are they [salespeople and customers] seeing?' " Hayes says. " 'Are people buying the basic home or are they going for upgrades?' So we have some idea on the trends because that has an influence on the mix of business we see coming in. Indirectly we will use this information to project unit sales forecast, and that drives into material planning and procurement. But as important are some of the decisions on new products we are coming up with and where we would be placing them in the market."

Additionally, the information tells the company how many seasonal workers to hire and train in the summer, when its staff can grow as much as 30%.

How were all of these important decisions made prior to the widespread use of database, spreadsheets, the Internet and other information-management tools in manufacturing?

"The president and vice president would hang out with their friends and then come back and argue over a cup of coffee what they would or wouldn't do," Hayes says with a chuckle.

Warning: If this sounds like your company, beware of extinction.

"The amount of information is going to increase," says Alcan's Foster. "It's the companies that can really effectively apply the best practices, eliminate as much work as you possibly can, automate what you can't, and continue with.

Kaiser Aluminum Closes On Sale Of Non-Strategic Asset

www.kaiseral.com

HOUSTON, Texas, March 14, 2003 -- Kaiser Aluminum said today that it has completed the previously announced sale of its interests in the Kaiser Center office complex in Oakland, California, to Summit Commercial Properties, Inc. for a gross cash purchase price of $65.6 million.

Kaiser Aluminum Corporation (OTCBB: KLUCQ) is a leading producer of alumina, primary aluminum, and fabricated aluminum products.

Friday, March 14, 2003

Aluminum smelters can compete if power is cheaper, study says

By BILL VIRGIN

SEATTLE POST-INTELLIGENCER REPORTER

A consultant hired by the United Steelworkers of America says idled aluminum smelters in the Pacific Northwest could be restarted and compete in world markets if they get a break on power prices.

While the study looked specifically at Kaiser Aluminum's Mead smelter, which has been out of operation since December 2000, its sponsors say the conclusions and recommendations apply to an industry that at one time provided thousands of well-paying jobs in Washington, Oregon and Montana.

Since the start of the West Coast energy crisis three years ago, in which power prices soared and electricity-hungry smelters were shut, "the question has been 'is the era of aluminum production over?' " in the Northwest, said David Foster, director of Steelworkers District 11 in Auburn.

The study comes as the industry continues to struggle with low product prices and, in the Northwest, high power costs.

Kaiser, which is in Chapter 11 bankruptcy court proceedings, recently announced a deal to sell its closed Tacoma smelter to the Port of Tacoma. Longview Aluminum is also in Chapter 11.

Things aren't much better for those smelters that are operating. Foster said Columbia Falls Aluminum in Montana and Goldendale Aluminum in Washington have both announced plans to reduce production capacity.

The Steelworkers union, Kaiser and the Washington state Department of Community, Trade and Economic Development hired Robin Adams, president of Resource Strategies, a consultant to natural resources industries, to conduct a "prefeasibility" study on restarting Mead.

At a news conference held yesterday to unveil the report, Adams said the key to the industry's survival in the region is driving down power costs to less than $30 per megawatt hour. With Northwest power prices at more than $35 per megawatt hour, "these plants don't have any future."

Those power prices could be driven down, Adams said, by reining in the Bonneville Power Administration's costs, and through new pricing plans that would give the smelters a break in exchange for interruptions of electricity at peak-demand hours or in low-water periods.

Aluminum companies have been talking about a long-term solution of developing their own generating resources and weaning themselves from Bonneville.

"If we look five years from now, I think that's perfectly viable" for the Mead smelter, Adams said. "The problem is getting from here to there."

Adams said lower power costs, flexible work rules and the capital already invested in Mead should more than make up for any competitive disadvantage against larger, newer and lower-wage smelters.

But the plan faces hurdles. Because Kaiser is in bankruptcy court, any plan for reviving, recapitalizing or selling the smelter must win approval from creditors and the judge.

Bonneville's flexibility in offering rate breaks may also be limited. It has announced another round of rate increases to take effect later this year. It has been trying to cut costs to limit the increase, but is under fire from groups who don't want fish recovery and conservation programs cut.

There is also a long-held belief by environmentalists that the aluminum industry has been subsidized by other ratepayers, so rate structure changes would likely inflame debate.

And while the BPA is dealing with high-price contracts it signed during the power crisis, a BPA spokesman noted that spot market prices are now much higher than the target cited in Adams' report.

While there's no current market demand for more aluminum-producing capacity, Adams said new smelters will be needed to supply growth in aluminum consumption for cars, construction and drink containers.

"If you abandon these plants, they'll have to be built somewhere else," Adams said.

Foster said the union and Kaiser will form a task force to push the report's recommendations. The union also plans to meet with BPA Administrator Steve Wright later this month to discuss the report's findings.

P-I reporter Bill Virgin can be reached at 206-448-8319 or billvirgin@seattlepi.com

March 17, 2003 - 1:29 am

Aluminum plant now must sell electricity

Associated Press

COLUMBIA FALLS (AP) - Already faced with layoffs and production line shutdowns, Montana's only manufacturer of aluminum faces another challenge - selling some of its electricity back into the market.

"We're going to have to sell it or lose it," said Haley Beaudry, a spokesman for Columbia Falls Aluminum Co. "I think we can get rid of it, although some of it might be at a loss."

The company, which uses about a fifth of all power consumed in Montana, has cut its production by 80 percent but some contracts require Columbia Falls Aluminum to keep buying the electricity.

"There are a lot of unknowns," Beaudry said. "Do you sell the power? If so, do you sell the power that cost you the most to buy, or do you sell the power you bought cheap?"

Last week, the company announced 175 of its 340 workers would be laid off, effective Monday, and then began the process of deciding who would leave.

"The union has been meeting all week to work that out," he said. "None of this is easy."

At the heart of Columbia Falls Aluminum's problems is the rising price of alumina, the raw material used to make aluminum. Company officials say it's gotten very expensive because of China's demand for alumina to fuel its rapidly rising production of aluminum. Compounding the problem are high power prices that could climb even more later as the region's ongoing drought affects hydroelectric production.

Beaudry said the company is continuing to operate one of its five production lines, even though it is losing money, just in case the aluminum market turns around. He said it would be expensive to shut down the entire plant, then restart it. Beaudry said the company is also worried about losing all of its trained employees.

Columbia Falls Aluminum, which began operating in 1955, closed its plant two years ago during a regional power crisis and sold the unused electricity. It resumed production a year ago.

Copyright 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Copyright © The Billings Gazette, a division of Lee Enterprises.

Amsterdam Court Rejects Corus' Application to Authorize Sale of Aluminum Conversion Business

PARIS--(BUSINESS WIRE)--March 13, 2003--Pechiney (NYSE:PY) regrets to announce that Corus Group plc has informed it that the Amsterdam Enterprise Court has today rejected its application to overrule the decision of the board of Supervisory Directors of its Dutch Subsidiary.

As a consequence, Corus Group plc is unable to proceed with the sale of its aluminum conversion business to Pechiney.

Pechiney is very disappointed that Corus Group plc -with whom an agreement in principle was signed last October- is not able to transfer its aluminum conversion business meaning that the transaction cannot go ahead. Pechiney has always been convinced of the excellent strategic fit that this transaction would bring to both Pechiney and the aluminum side of Corus and also of the very high level of synergies that had been identified. As a consequence, Corus Group plc will pay Pechiney an agreed break-up fee of 20 million euros, according to its contractual obligations.

Although the Pechiney Group will in principle remain open to a possible transaction in the future should Corus Group plc wish to reopen discussions, it will now pursue other investment targets, in line with Pechiney's strategic objectives and strict investment criteria. As in the past two years, the Group remains committed to selective and profitable growth, which has proved in 2002 to deliver the synergies expected from the Soplaril and Eurofoil acquisitions in 2001.

Certain statements in this press release that describe Pechiney's intentions, expectations or projections may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Pechiney's actual results, performance or achievement to be materially different from its intentions, expectations or projections. The forward-looking statements in this press release speak only as of its date and Pechiney undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

N.Hydro says Sunndal aluminium plant beating goals

Thu March 13, 2003 08:56 AM ET

By John Acher

SUNNDAL, Norway, March 13 (Reuters) - Norwegian industrial group Norsk Hydro NHY.OL says a project to expand its Sunndal aluminium smelter into the biggest in Western Europe is ahead of plan and likely to exceed its nominal capacity target.

The firm has finished Phase 1 of a three-step project to raise primary aluminium capacity at the plant in western Norway to 330,000 tonnes per year by the end of 2004 from 156,000, and says it can use electricity to squeeze out even more production, managers told Reuters during a visit to Sunndal.

Built in the 1950s with Marshall Aid from the United States, the Sunndal plant will overtake Norsk Hydro's 270,000-tonne Karmoy smelter as the biggest in Western Europe.

"The main milestones and the main parts of the project are all on schedule -- or actually ahead of the original schedule," said project leader Anton Husoy.

The first phase of the $600 million project was completed three weeks ahead of schedule, with the start-up in late November and 76,000 tonnes of new capacity and 108 of a planned 340 new cells brought on stream in early Febrary.

The first phase brought only a small net increase in capacity as an obsolete 66,000-tonne production line was closed down and dismantled at the same time.

"The second phase was planned to be started around July 1. As it seems now, it is very much more likely to happen in the beginning of May," Husoy said.

The second phase is slated to bring a further 81,500 tonnes per year of capacity on line, lifting the smelter's capacity to 247,500 tonnes, with the final 81,500 tonnes to be added before the end of next year.

Husoy said phase 3 was also likely to be completed ahead of schedule since phases 1 and 2 are going well. "It's a domino effect," he said. "It could be two or three months ahead of schedule, but we don't know that yet -- it's too early to say."

With primary aluminium capacity of 1.4 million tonnes and total business of some 2.1 million tonnes including trading and downstream remelting, Norsk Hydro is Western Europe's biggest aluminium firm. It took a big jump in 2002 by buying German VAW.

POWER IS KEY

Husoy said that by increasing the amount of power used in the energy-intensive process -- raising the amperage to 275 kiloamps from the current 250 -- it will be possible to increase the plant's final capacity to 355,000 tonnes at low extra costs.

"We are aiming at running on that (amperage) level from this year," Husoy said. "There are very, very small costs to go up to 275 (kiloamps)." He added that it may be possible to increase to 300 kiloamps in the future though that is unproved.

The completed plant will be Norway's single-biggest energy consumer, using 4.85 terawatt hours of electricity or about four percent of Norwegian consumption, up from 2.7 TWh now.

Norsk Hydro, which is also in the oil and gas and fertiliser bsinesses, has secured the Sunndal's power supply through long-term contracts with state energy group Statkraft which operates a large hydropower unit near the smelter.

Husoy acknowledged the the aluminium market is now weak, like other metals markets hit by the global slowdown. But he said Norsk Hydro was taking a long-term view and declined to say whether the new capacity was coming on stream at a good or bad time for the market.

"The strategic basis for this is the expected growth in downstram activities, with growth of two to three percent a year," Husoy said.

BIGGEST MAINLAND PROJECT

The plant is buzzing with activity as the modernisation has created work for up to 750 outsiders of 15-20 different nationalities, many of whom are housed in a temporary 640-room hotel built of portable construction site barracks.

"It's the biggest investment project in mainland Norway," said Jon Kristian Schnell, the plant's communications chief. It is eclipsed only by some big offshore oil and gas developments.

So far the company has built a 750-metre (yards) long hall to house a new potline with 224 cells, and will build another 375-metre long hall with a second potline of 116 cells. It is also building a new cast house.

It has also demolished a 1950s structure that housed the old potline based on so-called Soederberg technology -- a Norwegian invention that has not kept up with environmental norms and is also being phased out at three other Norsk Hydro plants.

Norsk Hydro has said it will remove up to 200,000 tonnes of capacity by shutting Soederberg lines at its Karmoey, Aardal and Hoeyanger plants, with over 70,000 tonnes slated to go in 2006 and 120,000 by the end of 2009

Guyana seeks offers for possible alumina plant

Reuters, 03.13.03, 5:20 PM ET

GEORGETOWN, Guyana, March 13 (Reuters) - Guyana would welcome private sector offers to build a 600,000 tonnes a year alumina plant to exploit the country's extensive bauxite deposits, Prime Minister Sam Hinds said on Thursday.

Hinds told Reuters that while the government had not yet received a formal bid from any foreign company, an existing 300,000 tonnes plant in Linden, central Guyana -- which was closed about 20 years ago -- could provide the basis for a new expanded alumina refining project.

"The government welcomes any such private sector initiative," Hinds said.

Fresh surveys were being made of the Pakaraimas bauxite deposits in western Guyana, which has shown similarities to existing deposits in western Australia, Hinds said.

"The results of these studies are quite attractive," he added. He said preliminary surveys showed potential for an initial operation mining 5 million tonnes a year of lateritic bauxite to produce 1 million tonnes a year of alumina.

The project could be enhanced by the construction of a new railroad linking to a deep water port at the mouth of the Berbice River in eastern Guyana.

"There are a number of potential hydropower sites in the Pakaraimas which might be developed to supply a bauxite-alumina operation, even a large aluminium smelter," Hinds said.

He added that the Guyana government was concluding a deal with Canadian miner Cambior Inc <CBJ.TO> creating a bauxite mining and processing company. Cambior had a 70 percent stake in the joint venture.

Copyright 2003, Reuters News Service

Kazakhstan schedules repeat tender for alumina producer shares

17.03.2003 10:13:00 GMT

Almaty. (Interfax) - Kazakhstan's government has scheduled a repeat investment tender for 31.76% of the shares in Aluminum of Kazakhstan, the company that controls Kazakhstan's alumina and bauxite industry, for 4.00 p.m. local time in Astana on April 15.

The tender commission, appointed by the finance ministry's Committee for State Property and Privatization, said the starting price would be 3.11 billion tenge ($20.5 million) and that bidders would have to pay a deposit of 155.5 million tenge.

The winner is required to organize the construction of a 240,000 tpy aluminum smelter in the Pavlodar region. The first, 60,000 tpy stage, must be in operation by the end of 2007. And the winner must buy alumina and electricity from local producers.

Costs related to the acquisition of the government shares in Aluminum of Kazakhstan will not be refunded if the buyer does not honor the conditions.

The shares were offered at a tender with the same conditions on January 28, but only one bid was received and the tender was invalidated.

Aluminum of Kazakhstan is one of the world's nine biggest alumina producers. It produces 1.2 million tonnes of alumina per year, but has said it has the potential to produce 1.5 million tonnes.

Columbia Falls Aluminum in Serious Trouble

Azom.com

Embattled aluminium producer Columbia Falls Aluminum is facing a new dilemma after having told its staff that 175 of the 340 staff would be laid off last week. Apart from trying to retain skilled staff, they now have to try and sell back some of the electricity they have purchased under contract.

The Montana-based company which accounts for about 20% of all electricity consumed in Montana has been in operation since 1955 except for a 12 month period when they closed up two years ago during a regional power crisis. They then re-opened, only to be faced with the rocketing price of their raw materials due to the aluminium boom in China.

The region is also enduring a drought that could have a dire affect on price of electricity which is generated by hydroelectricity.

These factors have lead to an 80% reduction in production. This in turn has resulted in the closure of 4 of their 5 production lines. The remaining line being kept in operation in the hope that the market will turn around, although it is operating at a loss.

Tolling Ban to Take Toll on RusAl

Moscow Times, Russia Friday, Mar. 14, 2003. Page 7

By Irina Reznik, Tatyana Golubovich and Ilya Khrennikov

Vedomosti A government commission said Wednesday it would abolish the tolling schemes used by aluminum companies to avoid taxes this year, while metals giants vowed to battle the government to preserve the lucrative system.

Aluminum tycoon Oleg Deripaska, who controls Russian Aluminum, the country's largest and the world's second largest producer, threatened Wednesday to sue the government if tolling is revoked.

"If Mr. Deripaska doesn't mind spending the money on a lawyer, he can take anyone he wants to court just like any other Russian citizen," a member of the commission on foreign trade protection measures replied.

The commission headed by Finance Minister Alexei Kudrin needs only a government ruling to implement its proposal to strike tolling from the books, since it does not require an amendment to the tax code. A draft ruling is expected by the end of this month and if approved, tolling schemes will cease to exist as of Jan. 1, 2004.

Tolling was introduced in the early 1990s as a provisional measure to help aluminum smelters with no working capital purchase raw materials.

A foreign company gives its own alumina, the raw material used to produce aluminum, to a Russian smelter and takes back the finished product.

Under legislation, tolling is the export of services, not products, and the exported products are exempt from value-added tax. In other words, aluminum producers pay in aluminum for alumina imports.

RusAl will lose $400 million a year if tolling is revoked, and it may be forced to shut down smelters in the Samara and Rostov regions, general director Alexander Bulygin told Interfax.

The government, meanwhile, calculates that the budget loses $115 million in foregone taxes to aluminum tolling.

Clothing manufacturing, chemicals and other light industries benefit from similar schemes.

Deripaska said Wednesday he would sue the government on the grounds of discrimination if tolling were abolished only for metals.

More likely, though, oligarchs with vested interests in the industry will try first to change the government's mind.

"Since a resolution hasn't been made yet, we still have time to take our argument to the right civil servants," a RusAl representative said.

Last December, RusAl lobbyists successfully suppressed a State Duma budget committee initiative to amend the tax code and make tolling illegal.

RusAl produces 80 percent of its aluminum through tolling mechanisms, and without the scheme, "We won't be able to attract the $1 billion needed to buy 3.5 million tons of alumina," Bulygin said.

Having not paid taxes on the bulk of its production, RusAl and No. 2 SUAL producer are worried about the tax burden they will face without tolling.

"With tolling, taxes are only paid from commissions for processing, while most of the profit remains outside of Russia," said Troika Dialog analyst Vasily Nikolayev. "Without tolling, taxes will have to be paid off the profit."

"The reality is we're helping the aluminum industry," said the Economic Development and Trade Ministry's Andrei Kushnirenko, a member of the commission.

RusAl and SUAL had lobbied the government to do away with 5 percent export tariffs on aluminum, to help them compete on world markets, and import quotas an raw alumina, Kushnirenko said.

"We decided to tackle the problem as a whole and having done away with tariffs, we decided to do away with tolling."

Alprom sees poorer performance

Bucharest Business Week, Romania

Slatina aluminum processor Alprom said its preliminary results showed that the net profit slipped to 35.28 billion lei (1.1 million USD) last year, compared to 43.2 billion lei in 2001. Its 2002 turnover reached 1,985.8 billion lei (60.2 million USD). Alprom's total debts amounted to 599.96 billion lei, while receivables stood at 320.38 billion lei. It employs 1,744 workers. The company's majority shareholder is a consortium comprising Marco Acquisitions, Marco International and Conef Bucharest. The consortium acquired the Privatization Authority's 69.9 per cent stake in Alprom at the end of last year.

Alcoa World Alumina boosts Texas alumina output

Reuters, 03.19.03, 9:30 AM ET

NEW YORK, March 19 (Reuters) - Alcoa World Alumina said Wednesday it will boost alumina production at its Point Comfort, Texas, refinery to 2.3 million tonnes per year from 1.8 million tonnes by the end of the second quarter due to increased demand for alumina.

Alcoa World Alumina, an alliance between Alcoa Inc. (nyse: AA - news - people), the world's largest producer of alumina and aluminum, and Australia's Alumina Ltd. <AWC.AX>, said the plant in 2003 should yield an additional 300,000 tonnes above the 1.8 million tonne production rate for a total of 2.1 million tonnes.

"Production levels at Point Comfort will continue to be evaluated in light of future marketplace conditions," an Alcoa World Alumina statement said.

Alcoa World Alumina operates refineries and bauxite mines in seven countries. Its total alumina capacity is 13.9 million tonnes per year.

Copyright 2003, Reuters News

Southwire Closing Cuts at Least 40 Jobs

BY GLEN WARCHOL THE SALT LAKE TRIBUNE

Southwire Co. on Tuesday confirmed plans to close its West Jordan plant, laying off more than 40 workers. The West Jordan operations will be consolidated into other Southwire manufacturing plants, company spokesman Gary Leftwich said. The company did not release the number of employees affected, but a worker estimated it at 40 to 50. Carrollton, Ga., -based Southwire will close the Utah plant over the next few weeks. The plant produces copper building wire and utility cable.

Building wire production will be relocated to Kingman, Ariz., where a multimillion dollar expansion is under way that will allow the Kingman facility to handle the additional capacity, according to a company statement.

The Utah plant's utility cable production will be shifted to Southwire plants in Hawesville, Ky., and the company's headquarters in Georgia.

"By increasing our utility cable production in our Kentucky and Georgia plants, Southwire will be able to better control the delivered cost of our products," said Eddie Adams, president of Southwire's Energy Division.

Southwire is North America's largest building wire manufacturer and one of the world's largest wire and cable producers. It makes copper and aluminum rod, building wire and cable, utility cable products, industrial power cable and flexible power cord.

glenwarchol@sltrib.com

RusAl aims to be top aluminium producer by 2012

Reuters, 03.20.03, 9:46 AM ET

MOSCOW, March 20 (Reuters) - Russian Aluminium (RusAl), the world's second biggest primary aluminium firm, said on Thursday it aimed to build new smelters and upgrade its existing ones to become the world's top producer of the metal by 2012.

"We intend to become the world's number one by 2012 and we plan to increase our production capacities by one million tonnes for this purpose," said Ilay Akhmetov, director of RusAl's newly created Construction Directorate.

RusAl, created in 2000 in a wave of mergers, owns the country's largest aluminium smelters -- Bratsk, Krasnoyarsk and Sayanogorsk -- as well as the fifth largest plant, Novokuznetsk.

It plans to increase aluminium output to 2.51 million tonnes this year from the 2.48 million it produced in 2002.

The world's biggest aluminium maker is Alcoa Inc (nyse: AA - news - people), which is expected to produce around 3.42 million tonnes of primary metal in 2003 and has capacity of 3.9 million tonnes.

RUSAL WORKING ON FOUR PROJECTS

Currently RusAl is working on four projects, full materialisation of which could increase the firm's nameplace capacity by 1.37 million tonnes a year, Akhmetov said.

He said RusAl intended to build the largest of the planned smelters, with a nameplace capacity of 500,000 tonnes of the metal a year, near the half-built Boguchany hydroelectric power station in the eastern Siberian Krasnoyarsk region.

"The time of construction will depend on the outcome of our current talks will the (national utility) Unified Energy Systems," Akhmetov said.

He declined to give details of the talks with UES <EESR.RTS> but said several forms of cooperation were being examined.

Akhmetov said RusAl also planned to build a smaller 300,000 tonnes per year smelter in another energy-rich eastern Siberian region, Irkutsk.

He said RusAl could build the smelter near the town of Taishet either independently, or jointly with the local Alyukom-Invest firm, which is building its own 250,000 tonnes a year smelter there.

Earlier RusAl said it planned to build a plant with a capacity of 500,000 tonnes of aluminium per year at Taishet.

"The capacity may be larger, but we will be more specific about it once talks with Alyukom are over," Akhmetov said.

RusAl intends to build another smelter with a 300,000-tonne a year capacity in the northwestern Murmansk region.

"I think the construction of the plant may start in 2005-2006 and we plan to build it within three, maximum in four years," Akhmetov said.

He said RusAl was considering other smelter projects, but declined to give details.

RusAl has also prepared a feasibility study of the second stage of its Sayanogorsk Aluminium Plant in southern Siberia, which will permit the smelter to raise annual capacity by 270,000 tonnes.

It may start implementing the $500,000 Sayanogorsk project later in 2003 in order to finish it in three years, he added.

Alcoa has plans to expand production in Iceland and China but it has shuttered or curtailed operations in areas like the U.S. northwest where production, energy and labour costs made them uncompetitive.

The company has said it is acting to lower the costs of its U.S.-based primary smelting to make it competitive.

(Additional reporting by Nick Trevethan)

Copyright 2003, Reuters News Service

Alcoa providing parts, services to Bombardier

Pittsburgh Business Times, PA 12:01 PM EST Thursday

Alcoa Inc. said Thursday it signed a contract to supply materials and services to Bombardier Aerospace, the struggling manufacturer of small jets.

Alcoa, based in Pittsburgh, said it will provide aluminum products including structural components and wing and fuselage skins for all Bombardier aircraft, including the CRJ, Learjet, Challenger and Global Express series.

Also, Alcoa will provider Bombardier Aerospace with supply chain and management services. Contract terms were not disclosed.

Deliveries to Bombardier manufacturing centers in Montreal and Belfast have already begun, according to Alcoa, which is the world's largest aluminum company.

Bombardier Aerospace is a unit of Bombardier Inc., a Montreal aircraft and railroad equipment maker.

The aerospace division announced plans early in March to lay off thousands, including workers at the Montreal and Belfast plants taking deliveries from Alcoa. The company said the layoffs were necessary to help it cope with the sagging market for its planes.

Bombardier Transportation, the railroad division, operates a production facility in West Mifflin, outside Pittsburgh. Alcoa is based on the North Shore.

FG concludes plan for privatization of ALSCON. . . increases equity holding to 91.4 per cent

Vanguard, Nigeria, Friday, March 21, 2003

FEDERAL Government efforts towards privatization of public enterprises got a boost with the restructuring of Aluminium Smelter Company of Nigeria (ALSCON ) as advised by the Bureau of Public Enterprises (BPE) to pave way for its privatization

Vanguard gathered from the Nigerian Stock Exchange (NSE) that the federal government has restructured the assets and liabilities of ALSCON as part of the restructuring objective to pave way for its sale to the private sector.

It was also learnt that government has raised its equity holding on the company from 70 percent to about 91.4 percent. With this development the equity interest of Forrestal AG of Germany has dropped from 20 percent to about 6.8 percent ,while that of Alcan Inc. of Canada declined from 10 percent to 1.8 percent.

Meanwhile, BPE officials have explained that the restructuring option was chosen after the financial and accounting Due Diligence revealed that the aluminium company was not only technically insolvent but also bankrupt . The bureau disclosed that Government objective was to reshape the ailing company and make It more attractive for investors.

However, president Olusegun Obasanjo who visited Akwa Ibom state recently had decried the continued closure of ALSCON in Ikot Abasi owing to inadequate working capital saying the company in which the Federal Government has so far invested billions of naira would soon be brought back to life.

It would be recalled that five years after the ALSCON was closed down as a result of lack of working capital , the technical managers of the plant, Forrestal AG of Germany had declared that facilities at the plant were still in good condition for the restart of the plant whenever the federal government, owners of the plant were ready to do so.

Project Manager of Forrestal AG, Mr. Mansfred Eschrich who made the confirmation in Ikot Abasi recently said the proper maintenance of the plant has remained a priority to Forrestal due to the commitment of the company to ensure that the multi million naira ALSCON plant is made to refunction.

Also, President Olusegun who had agreed to sign the onshore/off-shore oil dichotomy abrogation bill accused some top federal government functionaries of working to frustrate the reactivation of the Nigerian newsprint Manufacturing Company in Oku Iboku, Akwa Ibom state but vowed that his administration will soon reactivate the paper producing company which was shut down in 1986.

It would be recalled that progress were also recorded in the privatization programme of the Nigerian Reinsurance Corporation . Reinsurance Acquisition Group, the preferred bidder paid N 1.5 billion for the 51 percent equity interest of government in the company during the month of January.

SUAL in Komi

Moscow Times, Russia 3/24/03

MOSCOW (Prime-Tass) -- Aluminum giant SUAL Holding has registered a new company called Komi Aluminum in the Komi republic city of Ukhta in order to construct an alumina and aluminum smelter complex in the republic, a Komi government spokesman said Friday.

SUAL, the company's founder and only shareholder, is looking for foreign investors for the $2 billion project, Vedomosti reported.

Komi Aluminum's charter capital now stands at 3 million rubles ($95,600).

The construction of the aluminum complex is a step toward development of the Sredne-Timansky bauxite mine, which SUAL operates through its subsidiary, Boksit Timana.

The mine has proven reserves of 260 million tons of bauxite, which constitutes 30 percent of the country's total reserves.

IMCO seeking to buy more European aluminium plants

Reuters, 03.24.03, 7:43 AM ET

HAMBURG, March 24 (Reuters) - U.S. group IMCO Recycling Inc (nyse: IMR - news - people) is considering more purchases of secondary aluminium production plants in south and east Europe, the head of its German unit said on Monday.

Last week IMCO bought 100 percent control of German aluminium producer VAW-IMCO Guss by purchasing the 50 percent shareholding held by Norway's Hydro Aluminium, a unit of Norsk Hydro <NHY.OL>.

"We want to grow further and this includes looking at new markets in south Europe and east Europe," said VAW-IMCO Guss CEO Roland Scharf-Bergmann.

This could involve purchases of secondary aluminium production plants, he said. But no concrete talks are currently underway and specific countries are not being named.

Secondary aluminium is produced from scrap metal.

"We must be certain that we have sufficient supplies of raw materials and sufficient customers in the local markets," he said. "We are currently involved in market studies."

No decision has been made about building another plant for a new a 30,000 to 35,000 tonne per year secondary aluminium operation in Latchford near Manchester in north England, Scharf-Bergmann added.

Planning permission for the plant has been received from local government authorities but talks continue with the major potential customer, Canadian metals group Alcan <AL.TO>, said Scharf-Bergmann, who also heads IMCO's UK unit.

"Talks are not yet complete," he said. "We are still talking about whether the right package can be created."

A major question is whether Alcan would require deliveries of molten metal, he added.

"We expect a decision soon, I believe in the first half of this year."

"We could then start relatively quickly because the main planning permission is there. The plant could be built within 12 months."

VAW-IMCO Guss in Germany produces about 230,000 tonnes of largely secondary aluminum and is being expanded in a six million euro programme, he added.

New production furnaces will be installed this year at its two plants in Grevenbroich in central Germany and Toging in the south, partly replacing older systems.

This will raise production, mostly of secondary aluminium, by 15,000 to 20,000 tonnes annually, he said.

The company also produces about 25,000 to 30,000 tonnes annually of primary aluminium alloys from high quality scrap which will be increased by about 10 per cent.

Copyright 2003, Reuters News Service

CHINA PRESS: China Aluminum To Add 1.5 Mln Ton Capacity

Tuesday March 25, 9:23 AM

BEIJING (Dow Jones)--The world's third largest aluminum producer, China Aluminum Corp, plans to add 1.5 million metric tons of annual capacity through new projects in Henan and Shanxi provinces, the China Daily reports.

Chinalco Vice President Song Peikai said the company's Pingguo plant in Guangxi province is also expected to become fully operational in the second half of 2003, doubling its current annual capacity of 400,000 tons, the report says.

Chinalco produced 5.41 million tons of alumina in 2002, while China imported a further 4.55 million tons, the report says.

The report doesn't say when the additional capacity from the Henan and Shanxi projects will come on line.

Chinalco is the state-owned parent of Hong Kong- and New York-listed Aluminum Corp. of China (ACH), or Chalco.

Newspaper Web site: http://www.chinadaily.com

-By China Bureau, Dow Jones Newswires; 8610 6588-5848; djnews.beijing@dowjones.com

India Nalco To Hike Aluminum Output To 290,000 MT FY03-04

Yahoo News Wednesday March 26, 5:20 PM

New Delhi, March 26 (Dow Jones) - India's state-owned National Aluminium Co. (P.NAL), or Nalco, plans to increase production in the next fiscal year, starting April 1, 2003, to 290,000 metric tons from 237,000 tons expected to be produced in the current fiscal year, the Press Trust of India reported Wednesday.

The company also plans to increase the targets for alumina production to 1.59 million tons compared with 1.56 million tons produced currently, according to a memorandum of understanding signed between Nalco and the government, the report said.

Nalco is currently investing 40 billion rupees ($1INR47.6225) to expand its operations.

-By Sonal Singh, Dow Jones Newswires, +91-11-2307-4025 Sonal.Singh@dowjones.com

Aldoga smelter will go-ahead when funding shows up

By Scott Rochfort

Sydney Morning Herald, Australia March 28 2003

Construction of Queensland's most ambitious civil works project, the $3.8 billion Aldoga aluminium smelter, could begin in three months, advocates of the project said yesterday after the plant was given the environmental go-ahead.

Yet Aldoga is yet to provide details on how it will raise funds to build the smelter.

"It's not for me to speak about financing," said Aldoga's general manager of external affairs, Bob Stephens. He said managing director John Benson would detail the funding arrangements within a month.

The project's financial advisers, Babcock & Brown, declined to comment. Babcock's Australian boss, Phil Green, is listed as a director of Aldoga.

While the privately owned Aldoga said in November that construction would begin this month, Mr Stephens said the project was still on track after winning environmental approval. "At this stage this is a news item from our point of view," he said.

Yet Mr Stephens said Aldoga decided to make an announcement only after Environment Australia listed its approval of the project on its website last week.

Aldoga announced yesterday that the plant would be completed in 2006. Last October, when it entered a joint venture with Leighton and Fluor to assess feasibility, it said the plant would be finished in March 2007.

Aldoga moved the project that was slated for Lithgow, NSW, in 1999 to Gladstone after disagreeing with the Carr Government about electricity access and costs.

Aldoga says more than 3500 staff will be employed to build the plant, which will ultimately employ 900 people and produce 560,185 tonnes of aluminium a year. That is expected to translate into $1.5 billion in exports.

Mr Benson, with no experience in the aluminium industry, is perhaps best known for helping former prime minister Paul Keating find an Indonesian buyer for his Scone piggery in February 1994.

Last November, Mr Benson said his idea for the plant stemmed from his experience in building power stations, particularly in Indonesia. Given Australia had power, he said his "mind did a 180-degree spin and [he] said, 'What industry needs a lot of power?"' - hence his decision to build an aluminium plant.

With the Russian aluminium group RusAl reportedly showing interest in the smelter last year, Mr Benson said Australia's cheap power and relative political stability were the main drawcards.

Yet the only concrete result from Mr Benson's four-year efforts to build the plant is an agreement between the Russian designers of the smelter and Central Queensland University.

The university will work with the now-privatised Russian National Aluminium-Magnesium Institute (aka VAMI) in adapting Russian light metals technology to Australian and international design standards.

Alumina Ltd expect alumina demand to rise

The West Australian, Western Australia

ALUMINIUM consumption was expected to continue to rise significantly in the forseeable future, Alumina Ltd chief executive John Marley said today.

Alumina Ltd, the 40 per cent joint venture partner with Alcoa in Alcoa World Alumina and Chemicals (AWAC), released its first annual report today after its demerger from WMC Ltd in December.

In the report, Mr Marley said Alumina Ltd, which supplied a quarter of the world's alumina, would continue to review its operations to ensure they continued to meet performance targets and fit with the company's long term, strategy.

"This process has identified AWAC's specialty chemical business as a sale opportunity," Mr Morley said.

He said AWAC management had identified further improvements in operating costs in 2003.

However the company would be adversely impacted by the strengthening of the Australian dollar in early 2003.

If it continued to strengthen it would have a negative impact on Alumina's profit for the year, he said.

Mr Marley said there was a general expectation that there would be an increase in worldwide aluminium production in 2003.

The level of demand and stocks would be highly dependent on improving economies in most countries, he said.

While alumina spot prices had increased sharply during the first quarter of 2003 to more than $US200 ($A335.06) per tonne, the majority of AWAC's alumina was sold under set-price, long-term contracts.

"We expect further growth in western world alumina demand to continue in 2003. Demand for smelter grade alumina in China also continues to grow substantially above western-world demand," Mr Morley said.

Last month Alumina reported a net profit of $174.5 million for 2002, down from $402 million previously.

However, it said a better indication was its net profit from continuing operations which came in at $210 million, which compared to a forecast $218.5 million in documentation for the demerger.

The group attributed the fall in profits to a six per cent drop in the average aluminium price and lower alumina prices.

Alumina's 2003 profit forecast remains at $330.5 million.

Alumina Ltd shares closed down eight cents to $4.24.

Power shortage may shut Kaiser Aluminum unit in Ghana

GhanaWeb, Ghana Friday, 28 March 2003

The Volta Aluminum Limited Co. in Ghana (Valco), a unit of Houston-based Kaiser Aluminum Corp., may shut down in April because of low water levels at the Volta Dam which supplies its electric power, an energy industry source told Reuters on Thursday.

"It's very likely that Valco will shut down within four weeks. I don't believe the level of the Volta Lake will come back up to a reasonable level anytime soon to enable the company to operate even one potline," the source told Reuters.

Pots are electrolytic cells arranged in lines which reduce alumina, an intermediate raw material derived from bauxite, to aluminum metal.

A company spokesman could not immediately be reached for comment on a possible closure, according to Reuters.

Valco is now operating at 20 percent of its 200,000 tons per year capacity, with all but one of its five potlines closed since January of this year due to reduced power supply.

"The Volta Dam is already at 239 feet which is a foot below the official minimum operating level, and it's dropping by several inches every week," the source said.

The Volta Dam is a 912-megawatt hydro-electric plant at Akosombo, 63 miles northeast of the capital.

Meteorologists say rains are not expected for another six months in northern Ghana where the Volta River has its source.

Valco and the Ghanaian government are locked in a dispute over proposed increases in power tariffs paid by Valco to the Volta River Authority (VRA), the state-run power producer.

VRA receives about 1.1 cents (U.S.) per kilowatt hour of power from Valco, a fraction of what other Ghanaian companies pay.

Valco, located at Tema the main port and industrial city in the former British colony, has been the VRA's single largest customer.

Reuters reported that Ghanaian authorities say that because of the poor rains, the VRA now generates much of its electricity from costlier thermal sources, and cannot afford to supply Valco at the original rates.

Valco's parent company Kaiser Aluminum filed for Chapter 11 bankruptcy in February last year but said its filing did not include the Valco smelter.

RusAl Plans to Acquire Refinery in Guinea

Moscow Times, Russia Friday, Mar. 28, 2003. Page 7

Reuters Russian Aluminum, the world's second largest aluminum producer, said it intends to acquire Guinea's Friguia alumina refinery, which it currently manages.

"We have submitted a bid to privatize [Friguia], and we expect to privatize it this year," Alexander Bulygin, RusAl's chief operating officer, told reporters late Wednesday.

RusAl last year acquired a majority stake in the Guinean Investment Company Limited, which together with the government owns Guinea's Alumina Company, or ACG.

ACG manages the Friguia refinery located in western Guinea, 150 kilometers west of the capital, Conakry. The plant annually produces 700,000 metric tons of alumina, an intermediate product for aluminum.

"We have bought jointly a lease agreement with partners, but not the property rights [to Friguia]," Bulygin said without naming RusAl's partners.

RusAl officials in Guinea said last month the firm had struck a partnership deal with Reynolds metals, a division of the world's top aluminum producer Alcoa Inc., to raise production at the refinery to 1.2 million tons.

But Bulygin said RusAl is considering plans to increase it further to 1.4 million tons.

"We want to raise output by 700,000 tons; 500,000 tons is a minimum," he said, adding that according to preliminary estimates, the project will cost $250 million to $300 million.

The company suffers from a deficit of alumina, two tons of which are needed to produce one ton of aluminum. RusAl's two alumina plants, Achinsk and Nikolayev in Ukraine, produced 2.16 million tons of alumina in 2002.

RusAl aims to produce 2.51 million tons of aluminum this year.

RusAl has also submitted a bid in the privatization of a 29.15 percent stake in India's Nalco alumina plant. If RusAl gains control of Friguia and Nalco, it will be able to meet 90 percent of its needs for alumina.

RusAl hopes to leapfrog Alcoa to be No. 1 in the world by 2012, Bulygin said. RusAl presently accounts for more than 75 percent of the country's aluminum output and more than 10 percent of global output.

It plans to increase its output of the metal by at least 1 million tons by 2012 through building new smelters and upgrading the existing ones.

The company is building a new aluminum plant with annual output capacity of 500,000 tons in the Irkutsk region. Construction is due to be complete by 2010.

RusAl also plans to finish construction of an aluminum can plant in the Leningrad region with an annual output of 1.7 billion cans in 2003, he said.

RusAl has a 25-year contract to manage Guinea's Cie des Bauxites de Kindia bauxite mine and concession to develop another bauxite mine, Dian-Dian, in the country. Bauxite is the raw material that used to produce alumina.

Guinea has 30 percent of the world's known reserves of bauxite.

At home, RusAl plans to invest more than $1.4 billion by 2005 to upgrade its production facilities, Bulygin said Thursday, at a celebration marking the company's three-year anniversary.

Chukotka Governor Roman Abramovich and tycoon Oleg Deripaska co-founded RusAl.

The company recently announced its intention to issue a 5 billion ruble ($160 million) bond sometime this year.

Aluminum down and likely out

Last smelter in region lays off final workers, who don’t expect a call back

BY JEANIE SENIOR

The Tribune Issue date: 3/28/2003

This region’s aluminum industry is about to breathe its last.

The only aluminum smelter close to Portland that’s still operating — one of only three left in the Northwest — is shutting down.

Golden Northwest Aluminum Inc., owned by Portlander Brett Wilcox, announced Wednesday that the last few dozen workers at its Goldendale, Wash., aluminum smelter were being laid off.

The action was described in a media statement as a “temporary curtailment,” and Wilcox said he hoped to restart smelter operations as soon as possible.

The other two smelters still running, Alcoa’s Intalco plant near Bellingham, Wash., and Columbia Falls Aluminum in Montana, both are operating at only partial capacity.

It is widely believed that the 33-year-old Goldendale plant will not reopen, particularly if power costs, demand and world aluminum prices stay at current levels and competition from lower-cost foreign competitors, including China continues to rise.

There also are indications that Wilcox, sole owner of Golden Northwest, is wallowing in financial quicksand.

One laid-off smelter worker said, “I’m riding the horse until it croaks.” But he added that he doesn’t expect the plant to reopen and intends to go back to school to retrain for another job.

Even before the layoff notice, drastic cost-saving measures were put in place at Goldendale Aluminum, the company’s smelter. Vending machines were removed, microwave ovens and refrigerators unplugged, and lights dimmed in the employee locker room.

The second smelter Wilcox owns, Northwest Aluminum Co. in The Dalles, has been shut down since December 2000.

“The longer they stay down, the more costly it will be to restart them, which raises the odds against them,” said Lloyd O’Carroll, a metals industry analyst with BB&T Capital in Richmond, Va.

Few people in The Dalles expect that the smelter ever will make aluminum again.

Wilcox rejects such talk as doomsaying.

“You write negative stuff, people believe it and they give up hope,” he said, calling it a “self-fulfilling prophecy … I don’t think people have given up. I certainly haven’t given up.”

But he has been late making the last two payments, due in June and December, on the company’s $150 million first mortgage note, which is secured by Golden Northwest’s real property, plants and equipment.

On Dec. 17, Standard & Poor’s lowered the company’s credit rating from “CC” to “D” after it missed the deadline for a $9 million interest payment on the mortgage bonds.

Wilcox dismissed the downgrading as “old news”; he said he exercised a 30-day grace period and made the payment.

But during that same time period, Wilcox sold his year-old Klondike Wind Power Plant in Oregon for $16.8 million to Scottish Power’s PPM Energy Inc., a transaction that may have provided all or part of the bond interest.

The 24-megawatt project, which was intended to diversify Golden Northwest’s power sources, cost $24 million to build. Its first 20 years of power output will be sold under contract to the Bonneville Power Administration, which also contributed to the project’s construction costs.

Wilcox has another, larger, bill still looming: He owes BPA $13 million, plus interest, for power his company contracted to buy in fiscal year 2002. The bill came due on Dec. 5, and since a 90-day deadline passed on March 5, BPA has the right to terminate its contract to sell power to Golden Northwest.

The federal power marketing agency moved to terminate its contract with Longview Aluminum, which owes $16 million, but was stymied in its collection efforts when Longview filed for Chapter 11 bankruptcy reorganization.

Owner looks to BPA

Wilcox, who said he disputes the BPA charges, is working to find financing for his proposed Summit Westward power project, a $350 million, 520 megawatt gas turbine project at the Port of St. Helens.

He’s hoping to get BPA support for that project. But BPA spokes-man Ed Mosey said that’s not likely unless BPA’s other customers agree to the scheme.

“We’ve made it clear to Wilcox there would have to be some kind of customer review and approval,” he said.

Mosey said he wasn’t familiar with all of Wilcox’s proposals. “What he’s trying to work out is an agreement where we would basically extend or even, in some of his proposals, we would forgive the ($13 million) obligation.

“He’s just basically trying to come up with a deal,” Mosey said.

At one point, it appeared Wilcox might have gained support, Mosey said, “but then customers after taking a closer look apparently reversed themselves.”

Jerry Leone, the executive director of the Public Power Council, a trade association that represents the interests of 114 consumer-owned utilities in Oregon, Washington, Montana and Idaho, said Wilcox and his attorney met with a group that included other trade association representatives and officials from a few utilities more than a month ago to discuss his plan.

“It was Brett who called the meeting,” said Leone, who said her response to Wilcox and his attorney, after hearing the proposal, was: “Surely you jest.”

Leone, whose clients purchase electricity directly from BPA, said Wilcox is looking “for some sort of special deal or another. The No. 1 road block that the public (utilities) see is that he owes Bonneville about 13 million buckarooneys for the power. We have not been inclined to agree to anything until he agrees to pay up what he owes.”

Nobody’s thrilled

BPA’s own financial troubles, which could prompt a 41 percent rate increase later this year, eclipse other issues for the public power council, Leone said.

“It’s not as if anybody is thrilled to see the plants go idle,” she said.

With $13 million due to BPA and another $9 million interest payment looming on June 15, “it’s hard to see where the money’s coming from,” O’Carroll said. “What other assets does he have that he can sell? ”

In Klickitat County, where the Goldendale smelter is located, economic development officials are gloomy about the impact of the shutdown.

“From 1965 to 1983, we were in the top 10 percent of per capita income in Washington,” said Tom Seifert, the county’s head of business retention and expansion. “Now we’re in the bottom 10 percent, and that’s because of the loss of manufacturing jobs — four to five lumber mills, the smelter, the railroad.”

O’Carroll, the industry analyst, praised Wilcox for “resurrecting” The Dalles smelter and keeping Goldendale operating.

“The problem is that aluminum prices aren’t high enough, power prices are far too high. In the meantime, the world competitive landscape in that industry has worsened. Those are not good trends for somebody in the Northwest.”

Sarawak Hidro And Smelter Asia Agree On Bakun Hydro Electricity Deal

Bernama, Malaysia - Mar 28, 2003

KUALA LUMPUR, March 28 (Bernama) -- Sarawak Hidro Sdn Bhd and Smelter Asia Sdn Bhd have agreed on the proposed bulk sale and purchase of electricity to be generated by Bakun Hydroelectric power project (Bakun Hydro).

This was reached following the signing of memorandum of understanding (MoU) between Sarawak Hidro and Smelter Asia, Friday.

Finance Ministry in a statement, Friday, said the under the MoU, Smelter Asia was given the exclusive right to negotiate with a view to executing a power purchase agreement with Sarawak Hidro within stipulated time.

The MoU was signed by Mohamed Ali Alabbar, chairman of Smelter Asia, who is also the vice-chairman of Dubai Aluminium Company Ltd (DUBAL) and Sarawak Hidro was represented by its chairman, Datin Husniati Tamin.

The event was witnessed by the second Finance Minister, Datuk Dr Jamaludin Jarjis.

Smelter Asia, a joint venture company between Gulf International Investment group and DUBAL, will develop an aluminium smelting plant on a 250-hectares site in Similajau, Bintulu, Sarawak.

The Bakun Hydro is currently being developed by Sarawak Hidro, a wholly-owned subsidiary of Minister of Finance Incorporated.

It is scheduled to commence commercial operation by the fourth quarter of 2007.

The project will have a total generating capacity of 2,400 megawatts (MW), of which 1,700 MW is firm capacity and the balance is a non-firm.

The construction of Smelter Asia's aluminium smelting Phase 1 project for the production of 250,000 tonnes of aluminium ingots per annum is due to begin in 2005.

The initial earthworks is slated to commence at the end of this year.

According to the statement, it was proposed that the amount of electricty to be purchased under the Phase 1 project was about 450 MW.

The production capacity was expected to double to 500,000 tonnes when Phase 2 is completed by 2012, thereby doubling the power purchased to 900 MW, it said.

Sarawak Hidro, meanwhile, has completed two initial sub-components of Bakun Hydro.

These are the components relating to the three rivers diversion tunnels an auxillary cofferdam.

The statement said that the contract for four units of turbine-generators was in the process being awarded to a consortium led by IMPSA.

It said the prices obtained by Sarawak Hidro from these entities through tenders were very competitive, thus enabling it to offer very attractive prices to potential bulk purchasers.

The statement said the electricity to be sold by Sarawak Hidro to Smelter Asia would be transmitted to the latter's smelting plant by transmission lines to be developed and owned by SESCo.

For this purpose, Smelter Asia would enter into a separate agreement with SESCo.

It said that a tripartite agreement among Sarawak Hidro, SESCo and Smelter Asia would be necessary to ensure that the supply of electricity to the aluminium smelting plant could be executed without hitches.

SUAL's $2Bln in Komi

Moscow Times, Russia, Monday, Mar. 31, 2003. Page 8

MOSCOW (Reuters) -- No. 2 aluminum producer SUAL will begin construction of a $2 billion aluminum facility in the northern Komi region by the end of this year, the company said Friday.

SUAL has said it planned to invest more than $100 million this year to upgrade its plants and mines and about $25 million to develop new mines in a bid to increase production.

"We plan to begin construction [of the Komi facility] in late 2003, but preparatory work has already started," said Vasily Verbin, a SUAL spokesman.

He did not say if foreign investors would be involved in the project.

"It usually takes up to five years to complete such projects but weather conditions will have to be taken into account," he said, referring to the harsh climate in the region, a sparsely populated territory on the Urals mountain range.

Verbin said the project, to be launched together with the local government, will cost $2.1 billion and involve construction of an alumina refinery and an aluminum smelter

Funding boost for planned smelter

Daily Telegraph, Australia 31mar03

By John McCarthy

BABCOCK and Brown is about to launch a second infrastructure trust to help fund the $3.8 billion Aldoga aluminium smelter near Gladstone.

The project is now within four to five months of a construction start after raising enough capital through its first infrastructure trust to fund the first potline, estimated to cost $1.3 billion.

Aldoga also received environment approval last week from the Federal Government.

Aldoga spokesman Bob Stephens said that the project would now prepare for mobilisation of personnel and equipment to the construction site in the next four to six weeks.

"We still need to finalise a small number of permits and approvals, and resolve some contractual matters before the start of the initial earthworks," Mr Stephens said.

"The preliminary contracts and site establishment will take three to four months after which construction of the smelter will start.

"The support of the federal, state and local government has been critical," he said. "A project of this size requires the support of government and the community."

Aldoga received major project status from the Commonwealth Government and is gazetted as a project of state significance. It will have an annual production of 560,000 tonnes of aluminium when completed in 2006.

The company said the first infrastructure trust was fully subscribed, but would not reveal its members or exactly how much was raised.

Mr Stevens, said the project also now had offtake agreements for almost all of its metal production for 10 years. This was a significant achievement in the current environment.

"We could have sold 150 per cent (of production)," he said. "We are happy with the way things are."

The group is also negotiating with Comalco, which owns a nearby refinery, as well as other producers for the supply of alumina.

However Mr Stevens said the proximity of the Comalco refinery made sense.

Aldoga has previously said it had a letter of intent from one supplier.

"There are no impediments from our point of view," Mr Stevens said.

However, the construction contracts with Fluor and Leightons still needed to be completed. The project has also slashed several hundred million dollars from its expected capital cost but is still anticipating that it will ramp up to full scale development in about 18 months, with job creation ballooning out to about 2500 positions.

The plant will use Russian technology through VAMI which has an equity for metal option with Babcock. Output of 560,000 tonnes a year was less than 2 per cent of world output and world demand was expected to grow 3 per cent a year, Mr Stevens said.

Babcock and Brown and a private company backed by Aldoga managing director John Benson and other investors have provided up to $30 million in funds so far.

Comalco last year shelved plans for the $700 million expansion of its Gladstone aluminium smelter because because it believed the world aluminium market would remain in surplus for at least the next few years.

Wagerup emissions up: report

By Michael Southwell

NEW figures on a Federal Government database show Alcoa's Wagerup alumina refinery releases more harmful chemicals than previously thought.

The National Pollutant Inventory report for 2002 says the plant produces nine times more acetone, five times more methyl ethyl ketone and 40 times more sulfur dioxide than reported in 2001.

These substances produce skin, eye, nose and throat irritations - symptoms experienced by people living near the refinery who attribute ill-heath to pollution.

Alcoa says the increased figures were recorded in intensive monitoring which gave more accurate measurements.

The company's WA operations director, Giulio Casello, said the measurements showed emissions from the refinery were well within air quality guidelines.

An expanded list of substances which are required to be reported to the NPI database reveals that Alcoa's refineries at Wagerup, Pinjarra and Kwinana are producing significant quantities of pollutants known as volatile organic compounds.

Wagerup emits 210 tonnes a year of the compounds to the atmosphere, with Pinjarra emitting 180 tonnes and Kwinana 170 tonnes. These were not previously required to be reported under the NPI guidelines.

The database shows that the Kwinana and Pinjarra refineries are significant producers of the volatile organic compound acetaldehyde, a known carcinogen.

The Pinjarra refinery emits 36 tonnes a year, making it the country's biggest single source of acetaldehyde emissions.

Mr Casello said the substances chosen for reporting to the NPI were selected on the basis of their potential to affect the environment or human health.

But it was important to note that the hazard depended on the form of the substances emitted, the concentration and availability in the environment.

Yarloop and Districts Concerned Residents Committee chairman Tony Hall said Alcoa had boasted that a series of measures at the plant in 2000 had drastically reduced emissions.

"If that is the case and these new figures are right, they must have been producing enormous amounts of these pollutants in previous years," Mr Hall said.

Environment Minister Judy Edwards has admitted that a comprehensive independent audit of the Wagerup refinery emissions she promised last year is taking longer than expected. The delay was due to the complexity of issues involved.

She said a draft report had been prepared and was being checked for factual errors by Alcoa and the Department of Environmental Protection.