Alcoa-Rio Plant Workers Give in, ‘Exhausted’ From Lock-Out

(Bloomberg) -- An 18-month labor dispute at an aluminum smelter in Quebec controlled by Alcoa Corp. ended after workers accepted a deal, defying the recommendation of their union’s leadership.

On Tuesday, about 80% of workers at the Aluminerie de Bécancour Inc. voted to ratify the offer after a meeting of the United Steelworkers in Trois-Rivieres, Quebec, the union said. Alcoa said in a statement that the restart will begin on July 26, and is expected to be complete in the second quarter of 2020.

The deal, which covers everything from pension financing to the use of subcontractors, follows months of failed attempts to revive negotiations after more than 1,000 union workers were locked out in January 2018. Last week, Alcoa threatened to idle the entire facility if workers don’t sign what it called a "final offer."

The lengthy labor conflict signals the struggle of workers to push for their demands in a market that has seen aluminum prices tumble 15% in the past year. A strike at top copper producer Codelco’s Chuquicamata mine lasted only two weeks, with employees getting three of their four demands.

“After 18 months, we’d gotten to a place where the fight was unequal," said Clement Masse, the head of the United Steelworkers union ABI chapter, who is stepping down after members didn’t follow his recommendation. “We could feel our members were getting exhausted, which can explain the vote’s outcome.”

Alcoa shares fell 0.9% to $23.10 in pre-market trading in New York Wednesday, after rising 1.7% when the union vote was announced.

In the second half of this year, Pittsburgh-based Alcoa expects to record special items associated with restart expenses of $40 million to $50 million after tax, or 22 cents to 27 cents a share.

ABI, as the facility is known, curtailed production to about a sixth of its capacity of 413,000 metric tons a year during the period, Bloomberg Intelligence estimates. For context, Alcoa has forecast that its global aluminum shipments will hit a range of 2.8 million to 2.9 million metric tons this year.

The resolution is a good development for Alcoa and to a lesser extent Rio Tinto Group, which owns 25% of the facility, because it will be adding more aluminum production, according to Andrew Cosgrove, an analyst for Bloomberg Intelligence. But it’s not great for a global aluminum market already “drowning in supply,” he said.

Alcoa has said the package they offered would provide more funding to the pension, reduce subcontracting and allocate more paid hours for union business than the last offer, which was rejected in March. Contentious points also included workers’ career path and priority access to employees when coveted positions open up.

“We are pleased that ABI has a new labor agreement that will get employees back on the job, working together to improve the smelter for the long term,” Alcoa said in an emailed statement. “We will soon discuss the next steps with ABI’s employees.”

--With assistance from Laura Millan Lombrana.

To contact the reporters on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net;Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Luzi Ann Javier, Joe Richter

©2019 Bloomberg L.P.