INTERVIEW - Iceland gov't sees Alcoa smelter deal
Date: 17-Jul-02
Country: ICELAND
Author: Sigga Hagalin
The declaration on building the smelter in eastern Iceland is expected to be signed on Thursday or Friday, clearing the way for final negotiations in the next few months, she told Reuters in an interview.
"I'm very pleased with Alcoa's decision," Sverrisdottir said. "It means that the plans for building the smelter are running at full-speed. However, I must point out that the final decision hasn't been made yet."
The new smelter would roughly double aluminium smelting capacity in Iceland, whose abundant resources of geothermal energy and hydro-electricity have attracted metals producers to set up operations in the North Atlantic island.
Aluminium prices are currently struggling under the twin burdens of slack consumption and hefty metal inventories, with little sign of the current surplus of supply over demand being absorbed in the near term.
Analysts polled in the Reuters mid-year base metal survey this week forecast London Metal Exchange cash prices to average 69 cents a lb in 2003, compared with 63.4 cents this year and 65.5 cents in 2001.
Sverrisdottir's note of caution reflects Iceland's experience with Norwegian energy, metals and fertilisers group Norsk Hydro ASA, which had been negotiating to build the plant but then put off a decision until September. Iceland ic media have said Norsk Hydro has pulled out of the running altogether, although this is denied by Hydro.
"The declaration will cover the building of the smelter from beginning to end," Sverrisdottir said. "It will also say whether Alcoa is willing to commit itself enough for contractors to begin constructions this summer."
Alcoa's board of directors decided on Friday to continue negotiations with Iceland's government about the smelter, and the declaration would be the next step in the process, Alcoa said in a statement.
Sverrisdottir said she hoped to have all contracts between Alcoa and the government completed in the first quarter of 2003, so that construction could have the full go-ahead before spring.
"Summer is short in Iceland, and we can't afford to wait too long for construction to begin," Sverrisdottir said. "The ideal situation would be to have all contracts signed before spring."
The smelter has caused an environmental controversy in Iceland, as it will be powered by an enormous hydraulic power plant in the Iceland ic highlands, Europe's largest untouched wilderness. The power plant will change the course of two of the country's largest glacial rivers, and turn various valleys and canyons into reservoirs.
Plans call for work on access roads and the dam to start this summer, and work on the smelter proper to begin next year.
