Alcoa rules out closure of Portland smelter, for now

Alcoa’s aluminium smelter in Victoria will continue operating, for now, despite Alcoa reporting a significant net global loss in 2019, according to the aluminium giant’s earnings call.

While the smelter received $200 million in Australian government subsidies as part of a four-year package ending in 2021, Alcoa reported a $1.12 billion net global loss in 2019 and president Roy Harvey has said that part of the reason is that Australia has ”one of the highest energy price markets on the planet”.

According to the corporation’s Fourth Quarter and Full Year 2019 Results, while the company expects some benefits from the lower costs for raw materials in 2020, it expects this to be offset by “higher energy costs, lower rolled products shipments, and unfavourable price and mix.”

The company recently sold its waste treatment facility in Gum Springs, Arkansas, in a transaction valued at $250 million. The agreement to sell was announced in early January, after Alcoa announced a review of its assets to drive lower costs and sustainable profitability in October 2019.

The review is being conducted over the next five years and will include analysis of existing production capacity to consider opportunities for significant improvement, potential curtailments, closures, or divestitures, focusing on 1.5 million metric tons of global smelting capacity and 4 million metric tons of global alumina refining capacity.

It will also look into potential sales of “non-core assets” in order to generate between $500 million and $1 billion, as part of which the Gum Springs facility was sold.

The smelter in Portland, however, will continue operating until at least mid-2021.

According to Harvey, the deal Alcoa and the Australian and Victorian governments agreed to “was a four and half year deal, and that will go out to the middle of 2021, and so in between now and that particular moment in time we need to see if there is a repowering solution, or if there is another eventuality for that plant.”

As such, the company is in talks with the governments about finding an electricity solution for its loss-making Portland smelter.

“It is a plant that operates very stably, it is a good technology, it just happens to be one of the most highest energy price markets on the planet,” Harvey said.

One of the goals of Alcoa’s reform strategy is to create a portfolio of smelters, alumina refineries and bauxite mines with the lowest carbon emissions in the aluminium industry. The Portland smelter is largely powered by brown coal.

Harvey said price penalties applied to aluminium made with carbon intensive power “will become more real” in the future.

As part of that its reform strategy, Alcoa has established a joint venture with Rio Tinto, called Elysis, to create carbon-free aluminium from Canadian hydro power.