Iceland a contender for Alcan expansion

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

On May 11 the company announced it had signed an agreement with Reykjavik Energy to buy 200 mega watts of geothermal power. The deal goes into effect at the beginning 2010 and will last for 25 years.

But 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 line using Alcan’s own high-efficiency technology that would add 280,000 tonnes a year to the 180,000 tonnes currently being turned out 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. He says smelters in B.C., Quebec, Oman, South Africa, China and Cameroon were also being considered.

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

He went on to say the company would likely chose the three most prospective smelters for expansion.

The high aluminum price combined with shortages of production from Alcan, are said to be driving the 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 conscience aluminum producer.

If chosen, 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.

Alcan is the world’s second-largest maker of primary aluminum, with revenues of US$20.3 billion in 2005.

Midday on May 11 in Toronto, the company’s shares were trading at $64.40, up roughly 3% on just over 2.2 million shares.