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Aluminium scrap demand could rise as Alcoa cuts production

Aluminium recyclers are waiting to see whether there will be an increase in demand for recovered material following news that virgin aluminium producer Alcoa is to cut production.

The company announced it was reducing its smelting output by 18% (750,000 mtpy) in response to the tough economic conditions. Jobs at the company will also be lost, with 13,500 staff being made redundant and the use of contractor personnel being reduced by 1,700.

"Extraordinary times"
Alcoa president and chief executive Klaus Kleinfeld said: These are extraordinary times, requiring speed and decisiveness to address the current economic downturn, and flexibility and foresight to be prepared for future uncertainties in our markets.

We are taking a wide-ranging set of aggressive, but prudent, measures to ensure that Alcoa maintains its competitive lead in todays challenging markets while also emerging even stronger when the economy recovers.

But any effect for scrap markets could be small as warehouse stocks of the material are high and the worldwide demand has been affected by the global economic downturn. An industry expert told MRW that the rise in demand will depend on how long it takes to reduce stocks of the material.

The source said: The effect wont necessarily be immediate or very large. It depends whether the cuts in production lead to significant reduction in material available and the effect on the balance between production and demand levels. You really need to ask: Is this the beginning of a trend to reduce production?

Alcoa takes decisive action to address the economic downturn

* Smelting output reduced 18% (750,000 mtpy)
* Reducing headcount by 13,500 (13% of global workforce) and additional 1,700 contractor positions
* Freezing salaries and hiring
* Selling four non-core downstream businesses
* Reducing 2009 capital expenditures by 50%
* Taking advantage of new sourcing for raw materials
* Exchanging equity stakes with Orkla; Alcoa to take 100% ownership of 2 Elkem smelters for its 45% stake in SAPA
* After-tax charges for fourth quarter 2008 range from $900 to $950 million, 80% non-cash



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