Alcan growing to meet aluminum shortage

Alcan (AL-T, AL-N) has secured 40% of the energy it would need to significantly expand its aluminum smelter in Iceland.

But the deal doesn’t guarantee the smelter in Straumsvik will be the chosen one when expansion plans are announced, likely by the end of this year.

In mid-May, the company said it had signed an agreement with Reykjavik Energy to buy 200 MW of geothermal power. The deal goes into effect at the beginning of 2010 and will last 25 years.

Even if the remaining 60% of the energy requirement is confirmed — Alcan is currently negotiating with Iceland’s national power company, Landsvirkjun for the remaining amount — the company would still have to put the project through financial and engineering assessments to determine if it would go ahead.

If it does, the plan is to install a new production line using Alcan’s own high-efficiency technology that would add 280,000 tonnes a year to the current 180,000 tonnes for a total of 460,000 tonnes per year.

Alexander Christen, an Alcan spokesperson, says the Straumsvik smelter is one of a handful of expansion projects within the Alcan global network being looked at. Smelters in B.C., Quebec, Oman, South Africa, China and Cameroon are also being considered.

“We’re not only competing on a global scheme, but we’re also competing with each other,” Christen says.

The company would likely choose the three most prospective smelters for expansion.

The high aluminum price, combined with Alcan production shortages, is said to be driving the company’s zeal for expansion.

If Iceland holds an advantage, it might be its ability to generate clean power from its geothermal sources, as Alcan has established itself as an environmentally conscientious aluminum producer. Expansion in the country would add roughly 8% to Alcan’s current overall smelting capacity.

Today, Alcan has a global smelting capacity of 3.5 billion tonnes a year, coming from its 21 smelters in 10 countries.