Alcoa May Cut Australian Aluminum Smelter Output After Review

Alcoa of Australia Ltd., jointly owned by Alcoa Inc. and Alumina Ltd (AWC)., may cut production at its Point Henry aluminum smelter in the state of Victoria as global economic conditions “severely” hurt the industry.

A review of the smelter’s future will be completed by the end of June, the unit of the largest U.S. producer said today in a statement. The aluminum rolling mill at Point Henry and Anglesea power station aren’t part of the review, it said.

“A combination of factors, including metal prices, input costs and exchange rates, have resulted in the Point Henry smelter becoming unprofitable,” Alan Cransberg, managing director of the local unit, said in today’s statement.

Alcoa Inc., which last month reported its first loss in two years, joins United Co. Rusal and Rio Tinto Group in cutting production after a slump in prices. The current aluminum price is below the cost of production for about 30 percent of the world’s producers, according to Rusal.

A global aluminum surplus may shrink to the lowest level since 2007 as major producers cut output amid soaring energy costs and sluggish demand, Sumitomo Corp., Japan’s third-largest trading house, has said.

“The current situation makes it difficult for Point Henry to be globally competitive in the foreseeable future,” Alcoa of Australia said in today’s statement. “Our goal is for Point Henry to continue operating and meet its profitability targets. However, one possible outcome of the review is that production at Point Henry may be curtailed.”

Australia’s plan to impose a tax on carbon emissions didn’t prompt the review, the company said. The present situation is a result of low metal prices, a high Australian dollar and input costs.

“The future price on carbon would be an additional cost, however the Point Henry smelter is already losing money,” Cransberg said.

To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net

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