Alcoa reached an agreement with the workers’ representatives relating to the transaction of the two smelters, which were curtailed in February.
The company said in the statement Friday it expects to record restructuring-related charges in the third quarter of 2019, instead of the second quarter of 2019, estimated to range from $100 million to $140 million pre- and after-tax, depending on whether an acquisition or collective dismissal occurs.
In January, Alcoa agreed to keep the two smelters in restart condition until June 30, 2019, in the event that third parties would have an interest in acquiring the facilities. June 30 was the original deadline for the acquisition to be completed but this has now been extended to July 31.
Parter has guaranteed it will run the two plants at 100% employment for 24 months, which employs nearly 700 workers together, Raul Blanco, secretary general of industry in Spain, said on Spanish radio station Cadena Ser’s program Hoy por Hoy on Friday July 5.
“Today the agreement finalizes the labor agreement, we have found an investor that guarantees 100% of employment and provides a comprehensive solution to the two plants," Blanco said. "There will be an industrial future for the 600 families affected in La Coruna and Aviles. Today’s agreement closes the circle.”
The final acquisition is subject to a buyer-provided credit facility to support its future operations. If the acquisition cannot be completed by July 31, a collective dismissal and social plan, also known as the ERE, is expected to go into effect on August 1.
Blanco said does not expect an ERE to be filed.
Parter did not return requests for comment at the time of publication.
"The new Swiss partner said it will keep jobs for at least two years so that is why an agreement has been reached. It has been contested for months, nearly years, and now they are so close but the July 1 deadline has passed so it makes sense to extend it," one market source said.
The two smelters had a combined operating capacity of 124,000 tonnes per year, including primary aluminium, billet and slabs in 2017.
Keeping the two assets in its portfolio has proven costly for Alcoa.
In the first quarter of 2019, Alcoa recorded a net loss of $199 million
compared with a net profit of $51 million in the fourth quarter of 2018.
A majority of the net loss came from the $156-million in special items stemming primarily from a collective dismissal process at the two smelters in Spain.
“The shutdown of those smelters will cost $200 million. They’re saving $160 million a year to sell it,” a second market source said.
Yet selling the two smelters has been difficult. Alcoa had been trying to sell the two assets since 2016
A limited production capacity, less efficient technology and high fixed costs made the smelters less attractive to buyers. High raw material and energy costs also meant the smelters run at a loss, Alcoa said in a statement last October.
Alumina, a key ingredient for the production aluminium, hit a record high of $707.75 per tonne in 2018 due to a force majeure at Hydro’s Alunorte refinery in Brazil and US sanctions against Russian producer UC Rusal at the time.
"They tried to sell it to everyone. The government was desperate, it asked billet consumers if they wanted to club together. The workers and the unions were not going to let it shut," a third market source said.
Parter will have to put in further investments into the two facilities to make them more competitive, market sources said.
"It is old and inefficient and the new buyer will have to upgrade to make it profitable but it was becoming increasingly hard to close because of the backlash so people are happy the agreement will keep it open," the third market source said.
Some see the progression of the sale to Parter as a sign that the Spanish government might help make the La Coruña and Avilés plants more competitive.
“Some sort of favorable package will be inked, they’ll be given competitiveness. It’s completely political,” the first source said, referring to potential government energy subsidies. The source did not say whether the government currently provides any such subsidies.
Since 2018, the cost of raw materials has also decreased, which could help with the costs of running the two smelters.
Fastmarkets’ alumina index, fob Australia
, at $318.10 per tonne as of Thursday July 4, is now at its lowest since August 2017, with the expected return of Alunorte weighing on sentiment.
Alcoa’s other Spanish smelter, San Ciprián, which has a capacity of 228,000 tpy and produces both alumina and aluminium, will remain open.
Cristina Belda in London contributed to this report.
This article was updated on Friday July 5 to include official comment from Alcoa.