[chinalco.com] the high cost of aluminum production in Brazil prompted Alcoa Inc. to idle its pocos de Caldas smelter and use it to sell electricity, not metals, to the outside world as electricity prices soared to record levels this year.

The worst drought in decades has resulted in inadequate water storage in Brazil's reservoirs and the inability to supply enough electricity to aluminium smelters, which has pushed up costs in terms of labor and transportation. The city may be forced to limit water supply, and the Brazilian government cut import tariffs on aluminum last month to ease the shortage of aluminum supply caused by the increased demand for canned beverages.

Although the country has the third largest ore reserves in the world, it is importing more refined aluminium after production fell to its lowest level since 1996 in July. Aluminum prices rose to their highest level in 17 months this week, with Goldman Sachs saying that the reduction in production in Brazil will lead to a global aluminum supply shortage that will last at least until 2017.

"The production of aluminium is no longer profitable," said Milton Rego, executive chairman of the Baal "The future of the aluminum smelting industry is bleak."

Aluminum smelters consume a lot of electricity, and the cost of electricity accounts for half of the cost of aluminum production.