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Alcoa plans to close final two potlines at former Reynolds plant

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MASSENA - Alcoa announced Wednesday afternoon that it will permanently close the remaining two potlines at its Massena East smelter in New York in the first quarter of this year, marking at least the temporary end of a facility that has been an aluminum smelter since 1959.

The decision was made because the potlines are no longer competitive, corporate officials said in a press release . One of three potlines at the facility was permanently closed in August 2013. The closure will reduce Alcoa’s smelting capacity by 84,000 metric tons. The plant has 332 employees.

The Massena West facility will continue to operate, company official said in the press release. That plant has 669 employees.

Plant officials shared the news with local officials and employees Wednesday before the public announcement was made.

“We will be working with our unions, state, local and other stakeholders to minimize the impact of these changes,” said Bob Wilt, president of Alcoa Global Primary Products. “We appreciate the support of the New York Power Authority and will work with them and others to ensure our continuing success at Massena West.”

In a statement from Governor Andrew M. Cuomo’s office, the state said it is planning to enforce the terms of its contract with Alcoa.

“Representatives from the governor’s office and the New York Power Authority met with senior officials from Alcoa and impressed upon them that we intend to enforce the terms of the long-term power supply contract for Alcoa’s receipt of low-cost hydropower from NYPA’s St. Lawrence-Franklin D. Roosevelt Hydroelectric Plant, which requires the company to maintain employment at its plants.

“To be clear, we will hold Alcoa accountable to maintain the operation of the Massena West smelter and ensure the planned modernization of the Massena East facility proceeds without delays as required by the contract.”

The statement also indicates an “emergency meeting” will be held Thursday with company officials in New York City.

“Our goal is to protect jobs while avoiding involuntary layoffs in the north country - nothing less,” he statement said.

Town Supervisor Joseph D. Gray called Wednesday’s news “disappointing.”

“It’s disappointing, and it certainly saddens me for the employees and their families, but unfortunately it was not fully unexpected,” Massena Town Supervisor Joseph D. Gray said. “With reports of Alcoa’s fourth-quarter losses, it is clear that the economy isn’t doing very well and the aluminum business isn’t a good one right now from a profit standpoint.”

United Steelworkers Local 450 President David W. LaClair Jr. said while the news is not good news, he agreed with Mr. Gray that it was somewhat expected.

“I think that overall the general membership could see this coming, and with that being said, “I think the whole community has been expecting it too.”

Mayor James F. Hidy also was saddened by the news, noting the timing of Alcoa’s announcement couldn’t be much worse.

“It certainly comes at a bad time, with everything we’re trying to do to keep things positive and redevelop our town,” Mr. Hidy said. “With all of the positive things happening, news of this certainly puts a crinkle in things.”

Mr. Gray said he was told by Plant Manager Bob Lenney that the company would engage in negotiations with the United Steelworkers in an effort to minimize the impact of the shutdown on the Massena East employees.

Sources familiar with the situation said those talks would likely focus on shifting some of those workers to the Massena West Plant and using others to tear down the former Reynolds plant.

“We will be discussing these issues with the unions. We will work with the local unions to minimize the impact on jobs,” Christa Bowers, manager of media and corporate relations said in a press release.

Company officials said in August the closure of the one potline at the Massena East plant would impact approximately 100 employees.

Alcoa’s review of its primary metals operations is consistent with the company’s 2016 goal of lowering its position on the world aluminum production cost curve to the 38th percentile, and the alumina cost curve to the 21st percentile, according to the corporate release.

In 2013, the company met its goal of lowering its cost position in both aluminum smelting and alumina refining, having reached the 43rd percentile on the global aluminum cost curve, and 27th percentile on the global alumina cost curve. These shifts represent an 8 point movement and 3 point movement, respectively, since 2010.

Including the closure of the remaining two potlines at Massena East, Alcoa has announced closures or curtailments representing 361,000 metric tons of the 460,000 metric tons placed under review in May of 2013. Once the Massena East potline closure is complete, Alcoa will have total smelting operating capacity of 3,950,000 metric tons, with approximately 655,000 metric tons of capacity idle.

“We are taking decisive action to close the remaining potlines, given they are no longer competitive,” Wilt added. “We continue to reshape our commodity business to ensure it is positioned for long-term success.”

Total restructuring-related charges for the first quarter of 2014 associated with the above closure are expected to be between $60 and $70 million after-tax, or $.06 per share, of which approximately 40 percent is non-cash.

Ms. Bowers said the closing of the potlines at Alcoa East would not change the company’s modernization project schedule for the Massena East plant. “As our contract stipulates, we will conduct a financial review at the end of 2015 and move forward subject to board approval,” she noted.

This spring, Alcoa committed to invest at least $600 million to modernize its Massena operations and retain a minimum of 900 jobs at the company’s Massena East and Massena West smelters in return for 478 megawatts of low-cost hydropower from the New York Power Authority’s St. Lawrence-Franklin D. Roosevelt Hydroelectric Plant.

Alcoa announced in April it planned top spend $52 million through 2015 for site work and support projects that will begin in June. This is in addition to $40 million that has already been spent on the project.

The modernization project calls for the construction of a new potline at Massena East to produce 144,000 metric tons of aluminum per year, upgrades to existing facilities at Massena West and modifications to other existing facilities that will help integrate the two plants and support the new potline.

“From what I was told today the modernization schedule continues and a final determination will be made in 2015,” Mr. Gray said.

When asked if he thought the modernization would ultimately happen, Mr. Gray said he wasn’t sure.

“It will depend on the economy and what the price of aluminum is,” he said. “If it makes economic sense for them to manufacture aluminum here I expect they’ve move forward, but unfortunately we can’t control that.”

Mr. Hidy echoed those sentiments and said he was “cautiously optimistic that modernization would move forward as planned.”

“I’m being told plans are still continuing to move forward with modernization,” he said. “However, we are two years out and a lot can happen between now and then.”

The Massena East Plant’s three potlines used a Soderberg technology, while the Massena West Plant utilizes a more modern pre-bake technology, company officials have said.

“Because of the way the pre-bake pots operate, once the modernization project is complete the East Plant will see significant improvements in air quality and emissions, less waste generated in the aluminum-making process and a significant reduction in the amount of dust employees have to work around, creating safer, better working conditions,” according to an overview of the project on the Alcoa website.

Work to be done through 2015 in preparation for construction of the potline includes the relocation of transmission lines; upgrades to the East Plant’s ore gallery, which is a conveyor system that transports alumina within the plant; installation of a power management system which will allow the company to better manage electricity consumption at both plants; grading of the site and the installation of a new substation in partnership with the New York Power Authority.

State Senator Joseph A. Griffo said Alcoa leaders had assured him that this decision will not affect the company’s modernization plans or its Grasse River remediation project. “I will make sure the company fulfill its obligations to the New York Power Authority and the state. It is my hope that the company will consider its displaced workers first when the economy rebounds and the financial picture improves,” he said.

“I’m disappointed to hear of Alcoa’s decision to close its remaining two potlines at the East Plant earlier than originally planned. My hope is that the company takes advantage of state and federal programs to help its affected workers transition to new jobs within or outside the organization. My office stands ready to assist anyone who is left without adequate employment as a result of this decision,” Mr. Griffo added.

Alcoa had last shut down its potlines in May 2009 as part of a plan to idle the smelter until market conditions for aluminum improved. Planned layoffs began in mid-July 2009. Those lines were brought back online beginning in January 2011.

As a condition of a deal struck between Alcoa and NYPA at the time, the aluminum company was required to keep at least 250 workers at the East plant for the duration of the shutdown.

Mr. LaClair said company officials are currently speaking with the power authority and until the results of those conversation are known, many questions still linger.

“Alcoa is talking with NYPA and until we know the outcome of those discussions, everything remains up in the air,” he said, including what will happen to the plant’s employees and whether or not the plant will move forward with modernization.

“Until we know what happens with the power authority and its impact on our modernization, we won’t know fully what impact this will have,” he said.

Given the quality of the jobs offered at Alcoa and the number of jobs in limbo, Mr. LaClair said employees and their families aren’t the only ones who are worried.

“There’s a lot of people who could be impacted by this, from the plants nearly 350 employees to the area’s small businesses,” he said. “What happens with the state and the power authority will determine a lot.”

Bob Beckstead and Ryne Martin contributed to this report.

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