Alcoa, the world's third largest producer of aluminum, behind Rio Tinto Alcan and Rusal said yesterday that it had emerged as the world's largest primary aluminum producer after its stake swap deal with Norweigan Orkla ASA in SAPA extrusion profiles and Sweden's Elkem Aluminum.

Pittsburgh, Pennsylvania-based, Alcoa and Orkla ASA (Orkla) have agreed to exchange their stakes in a Norwegian smelting partnership and a Swedish extrusion joint venture.

The SAPA joint venture was created in July 2007 when Alcoa combined its soft alloy business with Orkla's SAPA unit. Aluminum extrusions are used for design solutions in virtually all sectors.

Under the agreement, Alcoa will receive Orkla's 50-per cent stake in Elkem Aluminum ANS while Orkla will receive Alcoa's 45-per cent stake in the $3.7-billion SAPA extrusion profiles business. The transaction is expected to be completed in the first quarter of 2009.

Elkem Aluminum, which will be 100-per cent owned by Alcoa following the transaction, includes aluminum smelters in Lista and Mosjoen, Norway with a combined output of 282,000 metric tons per year (mtpy). Included in the transaction is Elkem's stake in a newly opened anode plant in Mosjoen in which Alcoa already holds an approximately 82 per cent stake.

The addition of these assets increases Alcoa's global smelting capacity to more than 4.7 million metric tons, making Alcoa the world's largest primary aluminum producer.

''This action is an important step in the strategic process to strengthen Alcoa's smelting and anode business and to exit the soft alloy extrusion business,'' CEO Klaus Kleinfeld said.

Kleinfeld said, ''We will be assuming control over businesses where we are the recognised global leader – two smelters with long-term clean power contracts and an anode business that plays a vital role in supporting our operations in Europe and Iceland. This move makes good strategic and financial sense for both Alcoa and Orkla."

The SAPA Profiles business, which will be 100-per cent owned by Orkla following the completion of the transaction, is a leading independent manufacturer of aluminum extrusions and engages in extensive processing operations, including surface treatment, hydro-forming, friction-stir welding and CNC treatment.

It has production operations in 15 European countries, the US and China.

The two companies will continue to hold joint ownership in the carbothermic process technology Alcoa is developing together with Elkem, which is in the research and development phase.

The carbothermic process is a new technology that holds the potential to produce aluminum at a lower cost, driven by reduced conversion costs, lower energy requirements, and lower emissions and at a lower capital cost than traditional smelting.

The technology also holds potential for significant cost improvement in the production of other metals.

Alcoa expects to record an impairment charge in the fourth quarter of 2008 related to the exchange of its interests in the extrusion joint venture and is working with its advisors to determine the details.