Alumina plants in WA spared production cuts

The three alumina refineries in Western Australia’s southwest operated by the Alcoa and Alumina-operated AWAC joint venture have been spared in the latest production cuts made by AWAC in response to the crash in prices.

The 60:40 per cent-owned AWAC joint venture operates the Kwinana, Pinjarra and Wagerup refineries. Fears had grown that the operations could be hit hard by alumina’s 12-month price fall from $US350 a tonne to $US200 a tonne. But it is AWAC’s Point Comfort refinery in Texas that is to take the big hit, again, with Alcoa (AWAC’s manager) saying its remaining 810,000 tonnes of capacity would drop out by the end of the June quarter.

All up, AWAC is to idle one million tonnes of capacity. Where the additional 190,000 tonnes of capacity that is to be idled will come from was not specified. Alumina told the ASX that the curtailments would improve AWAC’s cost position and ensure its continued competitiveness in the prevailing conditions.

AWAC is expected to record post-tax charges of about ­$12 million in the June half, all of which will be cash related. The WA trio of refineries are considered to be among the lowest cost in the AWAC system. Still, Point Comfort was thought by most to be doing OK because of the offsetting impact of the collapse in US energy prices.

The idling of alumina capacity comes ahead of Alcoa’s plan to split itself in to two companies this year, one of which will house the “upstream’’ assets of bauxite mining, alumina refining and aluminium metal ­production.

While increasing amounts of alumina is traded on index-related prices meant to reflect its own fundamentals, the intermediate product remains hostage to aluminium prices.

Aluminium prices have crashed from $US1818 a tonne 12 months ago to $US1513 a tonne. It is a price at which much of the world’s industry struggles to make money. The surge in Chinese production, and the increased amount of Chinese material making its way on to world markets, is to blame for the metal’s languishing price.

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