Alcoa suspends primary aluminum production in Spain for two years

MADRID, December 29 (Reuters)Alcoa Corporation AA.N has reached an agreement with workers to end primary aluminum production at its San Ciprian plant in Spain for two years, the industry ministry said on Wednesday, as energy prices soar in Europe puts pressure on large electricity consumers.

Under the program, backed by some 70% of workers, the U.S. metal producer will halt aluminum smelting for two years, invest $103 million in the plant and seek to renegotiate supply contracts long-term energy.

The company agreed to maintain wages during the production shutdown and said it would not lay off any workers for the next four years. It will smelt aluminum scrap to secure supplies for certain customers.

Industry Minister Reyes Maroto said in a statement that the government supports the deal because it would avoid job losses and ensure the plant receives the investment it needs to stay in business.

Alcoa has long sought to shut down the San Ciprian smelter in Spain’s northwestern Galicia region, which is struggling to stay competitive amid high energy costs and low aluminum prices, resulting in several years of losses.

The company did not immediately respond to a request for comment on the deal.

It tried to lay off some 500 workers last year but was forced to scrap the plan after a Spanish court declared it “null and void”.

Union representative Jose Antonio Zan said on Wednesday the proposal was the least bad option available, but that halting production would turn the plant into a silent tomb.

“Politicians need to explain how, in the midst of a raw materials crisis, Spain can stop producing such a vital material,” he said shortly after the decision was announced.

(Reporting by Nathan Allen; editing by Barbara Lewis)

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