Quebec's status as low-cost, global centre of primary aluminum production just got another boost with Alcoa Inc.'s confirmation of plans for a $2.1-billion (U.S.) expansion and modernization program at three major facilities in the province.
Pittsburgh-based Alcoa, the largest producer of aluminum in North America, said Monday it plans to proceed with a five-year project to expand production, cut costs, modernize operations and reduce greenhouse gas emissions at its smelters in Baie-Comeau, Deschambault and Bécancour.
The decision comes after Alcoa was able to secure a 25-year commitment from the Quebec government for preferential electricity rates from Hydro-Québec.
Last week, Aluminerie Alouette – a consortium led by Rio Tinto Alcan – and Quebec Premier Jean Charest reached an agreement for low-cost electricity that clears the way for a proposed $2-billion (Canadian) modernization and expansion of a massive plant on the Lower North Shore of the St-Lawrence River.
Alcoa's investment is a vote of confidence in the province of Quebec as a source of low-cost electricity, massive amounts of which are needed to transform the raw material bauxite into aluminum.
The timing is right because the aluminum market is still weak and Alcoa will be well-positioned with higher capacity just as prices are expected to firm up over the next few years, one veteran industry analyst said.
"This demonstrates that even cyclical companies can improve their cost positions. It's the kind of thing a cyclical company should be doing when it can," said Charles Bradford of Affiliated Research Group LLC in New York.
Alcao says the project will allow it to reduce costs at the three Quebec smelters by 13 percentage points. Production capacity will be increased by 120,000 tonnes per year. Total yearly production at the three smelters as well as at the Bécancour rod plant currently stands at about 1 million tonnes.
Quebec has agreed to provide Alcoa with a bloc of 325 megawatts of electricity at an undisclosed preferential tariff.
As part of the modernization of Baie-Comeau, the older smelting pots that use Soderberg technology will be replaced with an all-new electrolysis pot line, resulting in a 40-per-cent reduction in greenhouse gas emissions, the company said in a news release.
Other improvements include an increase in the amperage at Deschambault, allowing for expansion of annual output.
"The government of Quebec has clearly envisioned the mutual benefits stemming from this new investment plan, and that's what enables us to look to the future with confidence," Pierre Morin, president of Alcoa Canada Global Primary Products, said in a statement.