The world's third largest producer of aluminum behind Rio Tinto Alcan and Rusal said yesterday that it lost $1.19 billion during its fourth quarter by taking a hit of $920 million one-off charge and global demand and prices for aluminum dropped.

Due to the worsening global economy, the impact in major aluminum markets particularly from the automotive, commercial transportation and building and construction sectors saw the price of aluminum declining by 35 per cent.

The demand for aluminum, which is also used to make cars, beer cans and aircraft windows have declined sharply due to the ongoing global financial crisis.

The long-drawn machinists strike at Boeing has not helped Alcoa, which resulted in a $10 million loss in sequential results.

In June, Alcoa had already cut 18 per cent of its alumina and aluminium production capacity due to the decline in prices and demand for the metal, but experts feel that Alcoa may have to make more then the present 18 per cent cut in production as the global financial situation is not going to improve for a long time.

China's biggest aluminum producer, Chalco had also announce a 18 per cent cut in production in October while Rio Tinto said last month it will reduce capital spending and sell assets to pay its mountain of debts derived from the acquisition of Alcan.

According to industry experts, the global demand for aluminum, which had fallen by 3 per cent last year, may fall by 2 per cent in 2009.

Klaus Kleinfeld, president and CEO of Alcoa said that if prices for aluminum does not improve in the coming months, than Alco may make deeper cuts in production.

In its earnings release, Alcoa said ''Income from continuing operations for the fourth quarter 2008 showed a loss of $929 million, or $1.16 per share, which includes restructuring, impairment, and other special charges of $708 million or $0.88 per share.

Results were driven by a 35 per cent decline in aluminum prices in the quarter, which is a 56 per cent decline from July and a sharp drop in demand, particularly from the automotive, commercial transportation and building and construction sectors.

''We are taking wide-ranging measures to address the economic downturn,'' said Klaus Kleinfeld, ''We have streamlined our portfolio to focus on businesses where Alcoa is the recognised leader, curtailed production to adjust to weakened demand, reduced global headcount, and achieved significant savings in key raw materials.

Kleinfeld also said that the company will cut or suspend its dividend as the Alcoa had a history of paying dividend for the past 60 years.

Looking to the future, Kleinfeld said, ''Once the economy stabilizes, the global megatrends – demographics, urbanization and environmental stewardship – will all drive opportunities for our core products. Aluminum has the ideal combination of strength, light weight and infinite recyclability to help countries rebuild their infrastructures for the 21st century. We are extremely well positioned to seize those opportunities.''

Alcoa World Alumina & Chemicals, the joint venture company of Alcoa and Alumina, has put off its $1.8 billion expansion of the Jamaica refinery.

The Jamalco project in Jamaica, which got the approval in 2005 was supposed to enhance alumina production by 1.5 million tones and Alumina said that it will incur a non-cash charge of about $40 million after tax resulting from Alcoa's writedown of some expenses relating to AWAC.

Alcoa had also announced early this year that it will reduce its workforce by 15,000 and put a freeze on salaries and new hires. Out of the 15,000 job cuts announced, 4,000-5,000 will come from North America, 4,400 in Europe and the rest from elsewhere including 1,700 contractors.