labels: Tata Group, Tata Steel, Steel, World economy
Corus sells last aluminum smelters to PE firm news
23 January 2009

Corus, the European steel arm of Tata Steel has signed a share purchase agreement to sell two aluminum smelters to Briand Investments B.V., an affiliate of London-based Klesch, one of the biggest private-equity firms in the metals industry at a time when prices and demand for the metal has fallen.

The two smelters, sold for an undisclosed sum, are located in Delfzijl in the Netherlands, and Voerde, Germany, and have combined annual production of more than 250,000 metric tons of primary aluminum.

Corus said the transaction remains subject to conditions being fulfilled by both the parties.

In August, Corus said that it wanted to concentrate on its core business of steel making and had initiated talks with Klesch to sell its aluminum subsidiaries in the Netherlands and Germany.

The aluminum smelters were the last remaining aluminum business with Corus as it had sold its aluminum rolled products and extrusions business to Aleris in 2006 for 826 million.

Klesch owns Zeeland Aluminium Company in Vlissingen, the Netherlands, which produces 260,000 tonnes of primary aluminium metal per annum and is currently building a 725,000 tonnes primary aluminium smelter in Libya.

Aluminium prices have plummeted by more than 40 per cent to around $ $1,330 a tonne on the London Metal Exchange (LME), the lowest since April 2003 as demand from industries as far apart as aerospace, automobile and soda cans has shriveled up.

The output for aluminum globally last year was approx 40 million tonnes and production cuts announced by producers amounted to approx 4 to 5 million tones but the market still carries a surplus of 1.3 million tones apart from the inventories held in LME warehouses, which is 1.55 million tonne, equivalent to more than half the yearly output of Australia, a major supplier.

This week, Rio Tinto Alcan in Canada 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 it's aging Beauharnois smelter near Montreal, due to a staggering collapse in demand for aluminum globally. (See: Rio Tinto Alcan to shed 1,100 jobs, cut production and close plant)

Rio Tinto, is also reviewing an $11-billion aluminium joint venture with Saudi firm Maaden as part of a reassessment of its entire aluminium business, and sources close to the project say it could be delayed by up to two years. This comes after a massive reduction in iron ore production announced recently by the group. (See: Ore miner Rio Tinto to slash output by a third)

Russia's Rusal, the world's largest producer of the metal, said last month that 75 per cent of the companies making the metal in China, Europe and the US were unprofitable following the price plunge.

In November, Alcoa, the world's third largest producer of aluminium, suspended a proposed $3.8 billion expansion of its Wagerup refinery in Western Australia. (See: Alcoa shelves expansion as aluminium producers cut back production)

Alcoa also said that it will cut its aluminium production by 350,000 tonne a year in November. This comes after an earlier cut of 265,000 tonne a year. Although Alcoa's massive cutback of 615,000 tonne amounts to as much as 15 per cent of its total capacity, it still trails the 720,000 tonne reduction announced last month by China's largest producer, Aluminum Corp of China (Chalco). (See: Alcoa to close Texas smelter, lay off 660 workers)

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.

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Corus sells last aluminum smelters to PE firm