Rio Tinto Group, the world's third-biggest mining company, said it will reduce aluminum production at its Alcan unit by an additional 6% and eliminate about 1,100 jobs because of low demand for the metal.
The latest cut of 230,000 metric tons brings Rio Tinto Alcan's annual aluminum output reductions since the fourth quarter to about 11%, or 450,000 tons, London-based Rio said today in a statement. Production of alumina, the material smelted to make the finished metal, also will be reduced by 6%, the company said.
``Our goal is to align production with customer demand and reduce our operating costs as much as possible,'' Rio Tinto Alcan Chief Executive Officer Dick Evans said in today's statement. ``The global economic downturn has meant that we must make difficult but necessary choices for our organization.''
Rio joins Alcoa Inc., the largest US aluminum maker, in cutting production to contend with falling prices and rising global inventories. Aluminum on the London Metal Exchange dropped 36% in 2008 while inventories more than doubled to a 14-year high as the global recession reduced demand for autos and appliances.
Rio fell 16 pence, or 1.1%, to 1,473 pence in London trading. The shares dropped 72% last year. Aluminum for delivery in three months on the LME slid $US28, or 2%, to $US1,395 a metric ton.
Smelter closing
Rio will permanently close the Beauharnois plant in Quebec, one of its 10 North American smelters, as part of the latest round of cuts, the company said. Production at an alumina refinery in Jonquiere, Quebec, will be curtailed by 400,000 tons a year.
Other measures include the ``expected sale'' of Rio's 50% stake in a smelter in China's Ningxia province. China's Qingtongxia Aluminum Co. plans to buy the stake, Jim Singer, a spokesman, said Dec. 31 without revealing the sale price.
Global aluminum production averaged 68,700 metric tons a day in December, the International Aluminium Association said in a report on its Web site today. That compares with 69,400 tons a day in November and 69,900 tons a year earlier. The IAI data don't include China.
Industrial metal prices are likely to decline further, said Fraser Phillips, a Toronto-based analyst at RBC Capital Markets.
``An extended global recession would have a significant negative impact on the base-metals commodity complex,'' Phillips said in a report today, recommending that investors stay ``underweight'' in copper, aluminum and mining stocks.
Alcoa has set production cuts since June representing about 750,000 metric tons, or 18% of its global capacity. The company said on Jan. 6 it plans to fire 13,500 employees this year and eliminate 1,700 contractors.
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