Wednesday, May 19, 2010

Alcoa (NYSE:AA) Seeking Lower Energy Costs

To combat their many rivals, Alcoa (NYSE:AA) is implementing a new strategy to cut the cost of energy, which accounts for about 30 percent of aluminum production costs.

High energy costs in Brazil could be their first target, as they're already looking at investing about $3 billion into a new smelter in the country, while closing others where the energy costs are prohibitive for doing business.

Alcoa will probably close their plant in Maranhao first, which has the highest plant costs in the world for them.

They are thinking about building a hydroelectric dam in Para state to lower production cost to become more competitive. The plant in that area is estimated to be able to produce at least 300,000 metric tons of aluminum on an annual basis.

Alcoa has been under pressure lately, and this is a response to competitors who have lower operational costs and higher margins. They're going over their entire company structure to see where they can make production changes like this.

Brazil aluminum production accounts for about 25 percent of the assets of Alcoa.

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