London 26/05/2016 - Alcoa is looking to sell its remaining Spanish aluminium smelting operations at San Ciprian, La Coruña and Avilés and is sounding out potential buyers, according to Spanish news sources.
The move comes after years of wrangling between Alcoa and the Spanish government over lower energy tariffs for La Coruña and Avilés, which were extended in January last year amid the threat of closure and the consequent loss of over 800 jobs in Spain's Galicia region.
Alcoa has sounded out investment bank Goldman Sachs to orchestrate the sale, according to local daily La Voz de Galicia, which also said that potential investors have toured the facilities over the past two weeks.
Any sale would mark a significant point for Alcoa, reducing its position as a major player in the European aluminium market after offloading its sheet metal and coil facilities to Atlas Holdings earlier this year and after the closure of its Portovesme smelter in Sicily in 2012.
In divesting its remaining Spanish assets, Alcoa would lower its active aluminium smelting capacity by 11 percent or 408,000 tonnes per year.
Capacity at San Ciprian is 228,000 tonnes per year of aluminium ingots, slabs and billets while La Coruña smelts 87,000 tonnes per year and Avilés 93,000 per year. As well, La Coruña and Avilés have a combined idle capacity of 53,000 tonnes per year.
Although La Coruña and Avilés are high-costs plants and have been vulnerable for some time, San Ciprian is generally considered a better project. Alcoa may be including it in the package as a sweetener to sell the other assets, market participants suggested.
Alcoa did not respond to requests for comment.
Alcoa will not sell its alumina smelting plant at San Ciprian, which it co-owns with Australian refiner Alumina Limited.
European customers of Alcoa expressed some concern that any potential buyer could axe production to create cost savings or whether the plants would be closed if investment cannot be found, although the market is currently well supplied.
"The interesting point is not that Alcoa would sell but rather who would buy? It could be a game changer but only if the plant shuts - what happens if there's no sale?" a European extruder source said.
"It's also that they're looking to exit Europe - what's their view on the European market? Are they saying that it's dead and they're looking elsewhere?" he added.
The company will split its upstream aluminium production and downstream value-added businesses into two separate publicly traded companies in the second half of 2016.
"Once they split, they're going to have to look at their portfolio and decide what should stay and what should go," a European trading source said.
(Editing by Mark Shaw)