Aluminum giant Alcoa struggles with power for its three smelters in Canada

Aluminum giant Alcoa to close its three smelters in Canada

Baie-Comeau Smelter, Quebec.

U.S. Aluminum giant Alcoa (NYSE:AA) may need to close all three of its smelters in the province of Quebec, Canada, as electricity supply cost for the plants is expected to jump 60%, TVA network reported late Tuesday (in French).

According the news outlet, Alcoa issued a 12-month notice to Hydro-Québec, which puts and end to its electricity contract for Bécancour, Baie-Comeau and Déschambault.

The miner, which swung to a third-quarter profit earlier this month, has been receiving power there at a discount price. But as of Jan. 1, 2015, the annual electricity bill will go up from 350 million to $570 million.

Together the plants employ a total of 3,300 people.

The news comes on the heels of a report that says this year, for the first time in a decade, mining investment in Quebec is expected to decline.

Image courtesy of Alcoa Canada.

(*) A spokesperson for Alcoa contacted MINING.com. Here is the company's official statement:

On Monday October 28th, Alcoa notified Hydro Québec of its intent to reduce its contractual obligations regarding the purchase of power for its three Québec smelters. The L-Rate that is set to go into effect on Jan. 1, 2015 would significantly increase annual energy costs to Alcoa, making its Quebec smelters uncompetitive.

Given the current conditions of the aluminum market and in absence of a satisfactory resolution with the Government of Quebec, Alcoa issued the notices in order to allow the company to gradually reduce power consumption beginning Nov. 1, 2014 through December, 31, 2014.

A competitive power rate is needed that allows Alcoa to continue to invest in its operations and maintain its important economic impact in Québec. The rate must be competitive on a global scale and flexible enough to adapt with changing aluminum market conditions.