Rio Tinto Alcan says weak metal prices have forced the aluminum producer to close its 72-year-old smelter in Shawinigan, Que., about a year ahead of schedule in November, affecting most of its 425 workers.
"With the current difficult market conditions and when we look at the short-term forecasts, the situation became financially unsustainable for Shawinigan, and this despite all the efforts the employees made to help over the past years," said Étienne Jacques, chief operating officer of Rio Tinto Alcan Primary Metal in an interview.
He said employees couldn't have done anything to avert the decision because the market finally caught up with the plant's old Soderberg technology.
"They have done almost everything that was imaginable to do, they have done it," said Jacques.
The announcement was made Wednesday, ahead of environmental regulations that would have forced the facility to close at the end of next year.
The Montreal-based company division of mining giant Rio Tinto said it will immediately curtail 50,000 tonnes of production and progressively cut the remaining 50,000 tonnes over four months.
About 26,000 tonnes of production will be reduced this year, with the full effect hitting next year.
About 60 workers will remain at the casting house until the facility closes at the end of December 2014. But all employees will continue to receive a full salary for a year, as outlined in the union collective agreement, said Jacques.
Rio Tinto Alcan has about 5,000 workers in Quebec.
Arnaud Soirat, chief executive officer of Rio Tinto Alcan Primary Metal, said the company will meet with union representatives to evaluate solutions such as retirements to minimize the impact.
Rio Tinto Alcan said it will provide impacted employees with retraining and job-search assistance.
The president of the local union said the announcement is a tough blow for workers and a community that has seen several manufacturers close in recent years, shedding hundreds of well-paying jobs.
But Louis-Gérard Dallaire said clauses negotiated in collective agreements anticipating an eventual closure will cushion the blow.
"Yes, the news is difficult, but there were measures put in put in place for workers to take their time and not feel rushed, that's kind of novel," he said.
'Have hope' in Shawinigan's future, mayor says
Shawinigan Mayor Michel Angers said the closure represents several million dollars of economic losses for the community but the plant's closure isn't a total surprise. He said efforts will now have to be accelerated on several projects to convert the facility.
"What I give as a message to people is to have hope. There will be jobs for the people of Shawinigan, there will be a future for the workers of Rio Tinto in Shawinigan," said Angers.
About 276,000 tonnes of aluminum capacity had been scheduled to be removed when the metal giant's division was slated to close facilities in Shawinigan and Arvida, Que., by the end of 2014. That will be offset by the addition of 60,000 tonnes with the impending opening of a facility using AP60 technology.
Arvida's future unclear
An expansion in Kitimat, B.C., will increase production to 420,000 tonnes from the current 187,000-tonne output.
Jacques said all facilities are evaluated in light of the difficult market conditions but he wouldn't say if other closures, such as Arvida, are planned.
Rio Tinto Alcan suspended two lines of production at the Shawinigan smelter after a major power outage at the end of 2011 forced the closure of two of the plant's four production lines.
The process of gradually restarting the 280 cells that were shut down was completed in the second quarter of 2012.
Commissioned in 1941, the smelter uses Soderberg technology, which is to be phased out of all Quebec primary aluminium smelters by Dec. 31, 2014 in compliance with Quebec environmental regulations.
Rio Tinto and rival Alcoa have been looking to curtail the higher costs of aluminum production as it adjusts to low metal prices.
London-based Rio Tinto is also looking to sell its Pacific smelters which have 1.6 million tonnes of capacity. The company is set to announce its latest financial results results on Thursday.
In May, the Quebec government announced that it had given both Alcoa and Rio Tinto Alcan more time to honour their investment commitments in the province because of the weak aluminum market.
Wednesday's announcement follows Alcoa's plans to eliminate about 500 jobs by permanently closing two potlines this summer at its smelter in Baie-Comeau, Que., while also delaying construction of more efficient facilities at the smelter for three years.
That announcement came a couple of weeks after Alcoa announced a 15-month review to cut worldwide production by 460,000 tonnes or 11 per cent of its global output.
The U.S.-based company said the review was in response to a more than 33 per cent drop in the price of aluminum since 2011.
It has already idled 568,000 tonnes of production capacity, or 13 per cent of its global network