Alcoa cuts global capacity by 12% Alcoa, the world's largest producer of primary and fabricated aluminium, is closing or suspending production at 12 per cent of its worldwide capacity as it attempts to cut costs and respond to the fall in aluminium prices. The move is a step in implementing the strategy announced in 2010 to improve the group's cost competitiveness by 2015, but also reflects the weakness in the aluminium market since the summer of last year. The benchmark price of aluminium on the London Metals Exchange peaked at $2,803 per tonne in May, and had fallen 27 per cent to $2,020 per tonne by the end of last year. Aluminium is often seen as a bellwether of the world economy because of its use in a wide range of industries, including aerospace, motors, construction and packaging. Analysts have been cutting sharply their forecasts of fourth-quarter earnings, which Alcoa will publish on January 9, opening the US corporate reporting season as usual. Nine out of 12 analysts surveyed within the last four weeks forecast that Alcoa would report a loss for the fourth quarter, according to Bloomberg. More than half the cuts it announced - roughly 7 per cent of its global smelting capacity - are permanent closures at US plants that have already been "curtailed": put into temporary suspension. The smelter at Alcoa, Tennessee - a town that was built and named for the company early in the 20th century - accounts for most of that closed capacity, about 215,000 tonnes per year The remaining 76,000 tonnes will come from two of the six lines at Rockdale in Texas. The remaining 5 per cent loss of capacity will come from curtailments at plants yet to be specified, which Alcoa hopes to announce "in the near future." The US smelters being closed are among the higher-cost plants in Alcoa's portfolio, and the company has set a target of reaching the lowest 41 per cent of the industry for aluminium production costs. It has also been hit by a combination of the falling aluminium price with rising costs for raw materials such as coke, pitch and caustic soda used to refine bauxite - aluminium ore - into alumina, the intermediate material, and then turn that into aluminium metal. "These are difficult but necessary steps to improve Alcoa's competitiveness, preserve and grow shareholder value and protect jobs in the rest of the Alcoa system," said Klaus Kleinfeld, Alcoa's chairman and chief executive. Because the jobs are lost when the smelters are curtailed - which happened in Tennessee and Texas in 2009 - there are not expected to be any additional job cuts from the permanent closures in those areas. However, there are likely to be job cuts associated with the new round of curtailments. Alcoa said it expected a restructuring charge of $155m-$165m after tax in the fourth quarter, or $0.15-$0.16 per share. Other companies have also been looking at cutting the costs of their aluminium operations. Rio Tinto, the mining group, last year announced plans to sell or spin off two groups of aluminium assets, including smelters; one in Australia and New Zealand, the other in Europe and the US.