February 27, 2018 / 7:23 AM / 6 months ago

UPDATE 3-Norway's Hydro told to cut output at Brazil alumina plant

* Brazil environment regulator orders 50 pct output cut

* Hydro hopes to comply with regulation, avoid cut

* Output cut could have significant financial impact

* Company has alumina buffer for “a few weeks” (Adds Brazil fine, SEMAS and Ibama comments)

By Joachim Dagenborg

OSLO, Feb 27 (Reuters) - Norwegian aluminium maker Norsk Hydro has been told by a Brazilian regulator to cut output from its Alunorte alumina refinery by 50 percent until it complies with an order to safeguard the environment.

The Secretariat of Environment and Sustainability (SEMAS), in Brazil’s northern state of Para where the plant is located, said it would fine the company 1 million reais (US$307,578) every day Alunorte failed to meet a Monday deadline to lower wastewater levels at a bauxite residue deposit.

Alunorte is the world’s largest alumina refinery, transforming bauxite to alumina, which is turned into aluminium at huge smelters.

The ruling followed recent claims by Brazilian federal and state prosecutors of a waste spill at one of Alunorte’s bauxite refuse deposits after heavy rain. Hydro reiterated that it found no evidence of any such pollution.

“While it is too early to determine the size and impact of the resolution, it could potentially have significant operational and financial consequences,” Hydro said in a statement.

Brazil’s national environment watchdog Ibama said it would carry out an inspection on Tuesday to assess if the damages match what has been reported by federal and state prosecutors.

Hydro said that SEMAS had said it would order Hydro’s Paragominas bauxite mine to suspend operations at one of two tailing dams at the plant.

“We have taken considerable measures to meet the deadline at Alunorte, and we will continue with full force to make sure that we comply with expectations and requirements,” Hydro Chief Executive Svein Richard Brandtzaeg said in a statement.

Separately, a company spokesman said Hydro hoped to comply with the regulator’s wastewater requirements later on Tuesday, and thus avoid a shutdown, although it had not yet seen the details of the ruling.

“We don’t yet know if this will be enough to avoid a production cut, but since the reason for the notice was that we did not meet the requirements yesterday, I don’t think that would be an unreasonable assumption,” Hydro spokesman Halvor Molland said.

Founded in 1995, Alunorte produces 5.8 million metric tonnes of alumina per year, according to Norsk Hydro’s website.

Hydro needs close to five million tonnes of alumina per year to feed its smelters, which are expected to produce around 2.4 million tonnes of primary metal in 2018, including output from an Icelandic aluminium plant it agreed to buy on Monday. .

Hydro holds an alumina buffer that covers “a few weeks” of production, Molland said, adding that it could also source the material externally if necessary.

On average, 14 percent of Alunorte’s production stays in Brazil and 86 percent is exported to the Middle East, North American and Europe, it said.

Hydro’s shares traded 2.1 percent lower for the day at 1017 GMT, underperforming a flat Norwegian stock market. ($1 = 3.2512 reais) (Writing by Terje Solsvik Additional reporting by Marta Nogueira in Rio de Janeiro and Jake Spring in Brasilia Editing by Larry King and Ben Klayman)

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