Alcan Considers Options After Icelandic Smelter Move Vetoed

LONDON--Alcan Inc.'s (AL) plans to boost its global aluminum smelting capacity by 8% have been temporarily scuppered by a referendum blocking the move, but the company plans to evaluate its options going forward.

Residents of a small municipality just south of Iceland's capital Reykjavik voted at the weekend against a plan that included a $1.2 billion expansion at Alcan's Isal smelter in Straumsvik.

The expansion would have boosted capacity from 180,000 metric tons a year currently to 460,000 tons a year with the construction of a new potline.

Opposition to the expansion centered on a plan to reroute a road rather than to the smelter per se, according to an Alcan spokeswoman in Montreal. This was part of a local urbanization plan, Anik Michaud told Dow Jones Newswires. The vote was very close, with 50.3% against the local urbanization plan.

Other smelter expansions and greenfield projects by U.S. Alcoa Inc. (AA) and Century Aluminum Co. (CENX) have in contrast been given the go-ahead and are proceeding as planned.

It isn't yet certain whether Alcan can appeal the vote or whether it has to modify and resubmit its plans in an attempt to secure local resident approval. Last week, officials at the Isal smelter suggested the company would consider withdrawing from the country if the expansion didn't go ahead.

Most of Alcan's aluminum smelting capacity is in Canada, but the expansion at Isal would have catapulted Iceland to the second largest producing country for the firm. The Canadian producer has been operating in Iceland for over 40 years.

This isn't the first time Alcan has come up against problems with an expansion - the company's plan to modernize its Kitimat plant in British Columbia stalled in January when the local utilities commission rejected the associated energy agreement. Alcan had to take the matter to the Supreme Court of British Columbia, who in March swung in favor of the company.

The Kitimat project still needs to meet other aims to hike Alcan's annual primary aluminum production by over 4%, taking output from 245,000 tons a year to around 400,000 tons annually.

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