Norsk Hydro to shut aluminium plant in Slovakia by end-September

LONDON, Aug 17 (Reuters) - Norsk Hydro will close its majority-owned primary aluminium facility in Slovakia by the end of September because of high electricity prices which show no signs of falling in the short term, the company said in a release on Wednesday.

European smelters are estimated to have cut an annualised 800,000 to 900,000 tonnes of aluminium production since energy prices began to rise last year.

Analysts say another 750,000 tonnes of output could be cut this coming winter, which would mean larger deficits and higher prices for European consumers in the transport, packaging and construction industries.

The Slovalco plant, 55.3% owned by Norsk Hydro and 44.7% by Penta Investments Group, with capacity to produce 175,000 tonnes a year of aluminium, is operating at only 60% capacity of 105,000 tonnes.

Slovakia’s government could have provided financial help through the European carbon compensation scheme, but it hasn’t, Norsk Hydro said.

The CO2 compensation scheme approved by the European Union allows national governments to award compensation to energy-intensive industries such as aluminium smelting to help them recoup some of the costs relating to high carbon prices they need to pay due to the Emissions Trading System (ETS).

“Slovakia has not implemented competitive EU CO2 compensation framework. This has prevented Slovalco from entering long-term power contracts and the plant’s current contract expires at the end of 2022,” said Ola Sæter, chair of Slovalco’s board of directors.

In countries such as Germany, the CO2 compensation for a smelter producing 200,000 tonnes a year will be about 67.55 million euros ($72.54 million) this year, according to Norsk Hydro’s calculations.

Hydro said the decision to close primary production will affect 300 of Slovalco’s full-time employees.

The casthouse in Slovalco will continue its recycling operation, serving customers in the region with 75,000 tonnes of recycled aluminium annually.

Consumers buying aluminium on the physical spot market pay the LME benchmark aluminium price, which hit a record above $4,000 a tonne in March, plus a duty-paid physical market premium, which in May hit a record of $615 a tonne in Europe. (Reporting by Pratima Desai; Editing by Leslie Adler)