Possible Subsidy for Alcoa Portland

Alcoa Portland smelter curtailed one potline for more than five hours when they experienced a power failure on 1^st of December. More than 200 pots cooled and solidified.

At the moment, Alcoa Portland is running at 30% of its capacity. It costs this 30 year old smelter around $1 million a day for the curtailment.

This has increased the possibility that the Portland smelter will close. As a result, Alcoa workers in Portland became concerned that their jobs will be lost.

This was not the first time Alcoa Portland faced closure. Since their long term power supply contract with the Victorian Government expired in November, Alcoa Portland faced potential closure due to high electricity prices, strong Australia dollar, and low aluminum price.

Alcoa Portland has provided employment for 600 workers, 180 contractors and around 2000 indirect jobs for the State of Victoria. The closure of the Portland plant would affect the local community and economy removing $800 million from Australian GDP.

Therefore it was not surprising to hear the Victorian Government offered a subsidy to save the Portland smelter this January. Alcoa could receive an offer of $240 millions. This includes $200 million in state funds for 4 years and a $40 million interest free loan from Canberra.

Although both the government ministers and Alcoa had declined the subsidy, due to the importance of Portland to the local community, we believe the local government is trying to offer financial assistance so the smelter may remain open.

This is not the first time Alcoa has received government subsidies upon threat of closure. In November of 2015, upon Alcoa announcing closure of their Massena NY smelter, NY State Governor Cuomo and US Senator Schumer quickly arranged an additional $38.5 million in subsidies and $30 million in lower electricity cost on an annual basis for 3.5 years in return for guaranteeing that the smelter’s employment would not drop below 600. These subsidies will equal about $240 million over the 3.5 year term……the same as Portland would receive!

If Alcoa truly receives a subsidy for the continued operation of Portland and in light of what they have already received for Massena, how would the WTO view this if a complaint was filed by…China?? As we know, U.S. aluminum companies, Alcoa one of the most vocal, has complained to the WTO pointing to China’s unfair practices of providing both export and power subsidies to the aluminum industry. If Alcoa is allowed to receive subsidies, does it mean the complaints by the U.S. government and Alcoa directed at Chinese smelters and government is unfair and hypocritical?

Chinese primary smelters may not be concerned about Alcoa’s government subsidies because primary aluminum exports from China are not large. However, we cannot help wondering what the Chinese semi factories will say about Alcoa’s government subsidies. We will update our readers with what we find out shortly.