August 1, 2014 / 2:50 AM / 5 years ago

Alcoa completes closure of Australia aluminuim smelter

SYDNEY, Aug 1 (Reuters) - Alcoa Inc closed its unprofitable Point Henry aluminium smelter in Australia on Friday underscoring the dire market conditions facing producers amid a flood of new Chinese capacity.

Alcoa announced in February it intended to progressively shut down operations at the 51-year-old smelter after a two-year review found there was no way to make the plant profitable.

“This is the end of an era and a very sad day for our 500 employees, their families and the Geelong community,” the smelter’s manager Warren Sharp said, referring to the town in the southern state of Victoria where the smelter is located.

Australia was once one of the world’s biggest aluminium producing countries but slipped to fifth in recent years as high costs and low prices led to curtailments.

The closure of the Point Henry facility eliminates around 190,000 tonnes of annual aluminium-making capacity, equal to about 10 percent of Australia’s total yearly output.

Since 1963 the smelter has produced more than 7.3 million tonnes of aluminium — enough to make more than 490 billion beverage cans.

In total, 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.

While Alcoa and other producers close old facilities that can no longer compete, China’s aluminium industry is expanding, albeit at a much slower rate than in the last decade.

Morgan Stanley sees Chinese capacity growing at a compound rate of just 5 percent a year through 2019 versus 15 percent between 2003 and 2013, and notes that since April China’s daily operating rate has dropped below peak 2013 levels, in part due to tariffs on electricity use.

The price of aluminium, also used in aerospace, construction and automaking, is up 19 percent from its four-and-a-half-year low in February of $1,671.25 a tonne.

Alcoa on July 8 forecast a global aluminum supply deficit of 930,000 tonnes, an increase from a deficit of 730,000 metric tonnes estimated in the first quarter. (Reporting by James Regan; Editing by Michael Perry)

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