Alcoa to partially restart smelter near Evansville, Indiana

Smelter to supply the Warrick Operations’ rolling mill.

July 12, 2017
Recycling Today Staff

Alcoa Corp., headquartered in Pittsburgh, has announced plans to restart three of five potlines at its Warrick Operations aluminum smelter near Evansville, Indiana, an action that will further improve the competitiveness of the on-site rolling mill, according to the company. The smelter at Warrick closed in March 2016.

The process to restart the three lines, with 161,400 metric tons of annual capacity, will begin immediately, Alcoa says, adding that it expects the restart to be completed in the second quarter of 2018. The three potlines will supply the Warrick rolling mill, which serves the North American market with flat-rolled aluminum for the food and beverage can packaging industry. The smelter’s molten metal will supplement purchased scrap metal and other raw materials that the Warrick site will continue to procure.

“By restarting a portion of the Warrick smelter, we will provide an efficient source of metal for the co-located rolling mill and help it meet an anticipated increase in production volumes,” says Tim Reyes, president of Alcoa’s Aluminum business unit. “The action will enable us to more fully utilize the assets at this integrated site for the benefit of our investors, customers, employees and the community.”

Two of the five smelting potlines will be classified as curtailed capacity and will remain idle. After this partial restart, Alcoa will have approximately 886,000 metric tons idled of its total smelting capacity of 3.4 million metric tons.

Restart expenses expected to be incurred in the third and fourth quarters of 2017 are estimated to be between $30 million and $35 million (after-tax), or 16 cents and 19 cents per share, on a combined basis, Alcoa says.

Additionally, in third quarter 2017, Alcoa says it will record an after-tax benefit of approximately $25 million, or 13 cents per share, for the reversal of liabilities related to the original closure.

The Warrick location currently employs about 1,250 people. The restart will increase the site’s employment by approximately 275 people, including those who will be hired or recalled from layoff status. Some existing employees will transfer to the smelter.

Alcoa says federal, state and local governments have shown their support for the restart plan. Alcoa adds that it appreciates the actions the Trump administration has taken to address the challenges faced by the U.S. aluminum industry, including Chinese overcapacity. As the Warrick Operations restarts aluminum production, Alcoa says it is confident the administration will continue to be attentive to the industry’s needs.

The state of Indiana, through the Indiana Economic Development Corp. (IEDC), and Warrick County offered preliminary assistance to support the restart plan. The IEDC offered Alcoa up to $2.4 million in conditional tax credits and up to $100,000 in training grants based on plans to add new full-time jobs for Indiana residents.

"With its decision to restart operations in Indiana, Alcoa is showcasing the value that this facility and Indiana's manufacturing expertise provide to its global operations," says Indiana Gov. Eric J. Holcomb. "In Indiana, we're witnessing incredible momentum as manufacturers continue to choose Indiana for growth, and we're pleased that Alcoa once again chose Indiana."

Alcoa Warrick Operations comprises the smelter and the rolling operations, which includes state-of-the-art casting, hot and cold rolling, slitting and coating capabilities. The operations also include the power supply for the smelter and rolling operations, consisting of a coal mine that fuels four generating units with a combined net capacity of about 750 megawatts. Three of those units are wholly owned by Alcoa Power Generating Inc. A fourth unit, Warrick Unit 4, with 300 megawatts of net capacity, is owned in a 50-50 partnership with Vectren, a utility headquartered in Evansville.

As part of the smelter restart plan, Alcoa Power Generating Inc. and Vectren have agreed to jointly own and operate Unit 4 through Dec. 31, 2023. Vectren’s support in the restart decision provides important clarity for the power portfolio at Warrick.

Carl Chapman, Vectren chairman, president and CEO, says, “Restarting the operations of the smelter is a significant economic development win, and we were pleased to play an important role in helping make this a reality.”

Ed Hemmersbach, vice president of operations for Alcoa Aluminum, says, “We appreciate the assistance and collaboration with numerous stakeholders in this process, including our employees, United Steelworkers Local 104, Vectren and the local and state officials who have all provided support in our work to strengthen the integrated operation here in southwestern Indiana.”