Rio Tinto Alcan in Canada has announced that it will shed 1,100 jobs, reduce aluminum production by 25 per cent at its big Vaudreuil alumina plant in the Saguenay and permanently shutdown its aging Beauharnois smelter near Montreal, due to a staggering collapse in demand for aluminum globally.

The Montreal-based company unveiled a new round of production and job cuts yesterday, and said that it will also cut back on aluminum production by 6 per cent or 230,000 metric tonnes, bringing its total reductions to 11 per or 450,000 metric tonnes since September.

About 800 employees and 300 contract workers will be laid off including 300 in Canada, of which 220 jobs will be lost at the Beauharnois smelter in Quebec that will be shut permanently.

Opened in 1943, the Beauharnois smelter located in southwest of Montreal, employs 220 people, with annual production of 52,000 tonnes. Since it used outdated Soderberg technology, the plant was to be phased out by 2015 to meet environmental regulations.

The Vaudreuil alumina plant in the Saguenay will reduce output by 25 per cent or 400,000 tonnes from its annual capacity is 1.6 million tonnes. It is the main supplier to Alcan's primary smelters in the region.

Jacynthe Côté, the new chief executive officer of Rio Tinto Alcan who is supposed to take charge on 1 February had to undertake the unpleasant task of axing jobs and curtailing production.

She said that the company's higher-cost operations will come under extreme pressure to cut costs to avoid production and job cuts in the future and the aging smelters in Arvida and Shawinigan are on that list.

The smelters at Shawinigan and Saguenay, are scheduled to close by 2015 to comply with Canada's environmental regulations.

Due to low cost electricity in Quebec, Rio Tinto Alcan has an advantage over its competitors because more than 80 per cent of its operations are in low cost areas but Cote said that even low-cost operations are not secure in the current global market.

Aluminum inventories around the globe have soared to a ten year high and until demand shows a strong sign of recovery there will be more production cuts around the world, she said.

The global aluminum industry is on the brink of collapse due to the worldwide economic slowdown and demand has slumped from China and recession hit US, Japan and Europe with aluminum prices plunging below $1,400 a tonne or about 62 cents a pound on the London Metal Exchange yesterday, the lowest price since 2003.

The worsening global economy has an 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.

Last week, Alcoa the world's third largest producer of aluminum behind Rio Tinto Alcan and Rusal said 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. (See: Alcoa reports $1.19 billion loss in Q4; may again cut production)

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.

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 announced an18 per cent cut in production in October and Rio Tinto Alcan has already delayed major aluminum projects in Quebec worth more than $4 billion.