* Alcoa to close Australia Point Henry aluminium smelter
* Underscores pressure on producers to control costs
* Will bring total Alcoa capacity cuts to 551,000 tonnes
* Output by Chinese producers growing
By James Regan
SYDNEY, Feb 18 Alcoa Inc said it will
close its Point Henry aluminium smelter and two rolling mills in
Australia, underscoring the dire market conditions facing
producers amid a flood of new Chinese capacity.
Alcoa is shutting the 50-year-old smelter after a two-year
review found no prospect of it becoming financially viable.
Australia was once one of the world's biggest aluminium
producing countries but has slipped to fifth as costs of
production climbed and prices dropped.
Point Henry's closure in August will eliminate around
190,000 tonnes of annual aluminium-making capacity, equal to
about 10 percent of Australia's total yearly output.
"These assets are no longer competitive and are not
financially sustainable today or into the future," Alcoa Chief
Executive Klaus Kleinfeld said.
Including the Point Henry smelter, Alcoa has announced
closures or curtailments representing 551,000 tonnes of smelting
capacity, exceeding the 460,000 tonnes placed under review in
"The global oversupply of aluminium has devastated our
industry," said Paul Howes, national secretary for the
Australian Workers Union, adding the union tried in vain to save
nearly 1,000 jobs set to be lost at the smelter.
Goldman Sachs recently lowered its 2014 forecast for
aluminium prices by 3 percent to $1,700 a tonne. -- the lowest
since July 2009.
Alcoa's closure of Point Henry also turns attention back to
the troubled aluminium operations in Australia and New Zealand
owned by Rio Tinto.
In August, Rio Tinto abandoned plan to spin off its Pacific
Aluminium business housing 13 underperforming smelting and
alumina-making businesses after failing to find any buyers.
At Rio's Bell Bay smelter in the Australian island of
Tasmania, union workers have agreed to forego guaranteed pay
increases in exchange for greater job security.
In August, Rio Tinto accepted a NZ$30 million ($25.07
million) subsidy from the New Zealand government to help keep
its Tiwai Point smelter afloat.
CLOSURES AS CHINA GROWS
Alcoa's not the only one scaling back operations.
Rio Tinto shut a 100,000-tonnes-per-year smelter in
Shawinigan, Quebec last year, while Norsk Hydro's
180,000-tonne Kurri Kurri smelter has also been mothballed.
At the end of last year, Aluminium Delfzijl, the last
remaining smelter in the Netherlands, with annual capacity of
110,000 tonnes, applied for bankruptcy.
Russia's Rusal, the world's biggest aluminium
producer, estimates that producers outside of China eliminated
up to 1.2 million tonnes of capacity last year and further
reductions of 1 million-1.5 million tonnes are expected in 2014.
For its part, Rusal cut production by 325,000 tonnes in 2013
and it plans to remove a further 325,000 tonnes in 2014.
While Alcoa and other established producers shutter old
facilities that can no longer compete, China's aluminium
industry is growing.
China's production is estimated to have increased by around
six percent to 21.5 million tonnes last year alone.
Lower energy costs have encouraged higher output at smelters
in China's northwest provinces as well as restarts in the
heavily industrialised provinces of Guangxi and Sichuan.
These production increases are aimed at offsetting capacity
cuts at out-dated and inefficient operations, as the government
strives to achieve emissions and sustainable growth targets
outlined in its 12th Five-Year Plan.
Even with all the cuts so far, analysts polled by Reuters
expect a surplus of 568,400 tonnes this year.
The price of aluminium - used in the aerospace, construction
and automotive sectors - has nearly halved since 2008 due to a
massive global surplus of the metal, forcing loss-making firms
to slash capacity and make savings.
Alcoa's 358,000-tonnes-per-year Portland smelter will
continue normal operations, as will bauxite mining and alumina
refining operations elsewhere in Australia, the company said.
A coal mine and power station supplying about 40 percent of
the power needs for Point Henry, will be put up for sale,
according to Alcoa.