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Alda Kravec

Alcoa Inc., which operates one’s of the largest aluminium smelters in Iceland, had its credit rating cut to one level below investment grade by Moody’s Investors Service yesterday, Bloomberg reports.
According to Moody’s, the credit rating cut is due to a global oversupply of aluminium, a constant fall in prices since 2011, and Alcoa’s staggering debt of 8.6 billion US dollars.
Despite Alcoa’s recent success in reducing its debt and expenses by closing smelters and finding ways to operate more efficiently and expanding profitable segments by selling aluminium alloys to the automotive, aerospace and energy industries, the company has not been able to keep at bay the effects of a global oversupply of aluminium and a consequent fall in prices.
According to Bloomberg, aluminium prices have fallen as a result of slowing economic growth in China and rising global production. Bloomberg further reported that Alcoa’s “Strength in the automotive and aerospace industries isn’t sufficient for a “significant” recovery in profitability.” For the past eight years, global output of aluminium has exceeded demand and the USB Bloomberg CMCI index of commodities ranks the metal as the third-worst performer over the past five years.
Alcoa is the world’s largest producer of aluminium with operations in over 30 countries worldwide. Alcoa runs Alcoa Fjarðaál sf., a smelter in Reyðarfjörður in the east. Powered by the controversial  Kárahnjúkar dam project, Alcoa Fjarðaál sf. began operating in 2007. According its 2011 factsheet, Alcoa Fjarðaál claims to be Iceland’s biggest industrial company accounting for 17% of the country’s total export products and employing up to 800 workers in and around their premises.
Yet, in March of this year, Alcoa was reported as getting away with paying little to no income tax in Icleand by manipulating tax laws and funnelling funds abroad, provoking the IMF to recommend that Iceland change its tax laws.
Magnús Þór Ásmundsson, president of Alcoa Fjarðaál sf. has asserted that Moody’s recent downgrading of Alcoa will not affect company operations in Iceland. He told mbl that Moody’s decision largely concerned loan financing and investment and that it would have no influence on Alcoa Fjarðaál sf. because production in Iceland was not financed with borrowed capital. Whatever that means.