Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

Alcoa's Australian smelter needs cheaper power to stay open past 2021 - partner

Published 05/12/2019, 06:08 pm
Updated 05/12/2019, 06:15 pm
Alcoa's Australian smelter needs cheaper power to stay open past 2021 - partner

MELBOURNE, Dec 5 (Reuters) - Alcoa (NYSE:AA) Corp AA.N will need cheaper, more reliable power to keep its Portland smelter in Australia open beyond 2021 when its current supply deal ends, the aluminium major's partner said on Thursday.

Alumina Ltd AWC.AX , Alcoa's partner in the Alcoa World Alumina and Chemical joint venture, would have a veto over any decision to shut the plant, its Chief Executive Mike Ferraro said, adding it was too early to predict the smelter's future.

"We would ideally like to find a solution," Ferraro told reporters on the sidelines of a mining event in Melbourne.

"It's well run, it's a relatively new smelter," he said.

The power contract for the Portland smelter, which consumes about 10% of the state of Victoria's electricity, ends in mid-2021.

"Ideally, we would like to renegotiate a new power contract at a lower price," Ferraro said.

The Portland smelter was rescued in 2017 with Australian federal and state government subsidies of around A$230 million ($156 million) and a cheap power deal, after being crippled by a blackout that caused molten aluminium to solidify.

The plant has been plagued by power issues over the past few years, and now gets paid to curtail power use to help prevent blackouts during heatwaves. Two weeks ago it had to cope with eight hours of shaky supply.

Speculation the plant may be shut in 2021 grew after Alcoa said in October that it planned to curtail, close, sell or improve 1.5 million tonnes of smelting capacity over the next five years to help it become the world's lowest per ton carbon emitter among aluminium producers.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The Portland plant, co-owned by AWAC, CITIC 0267.HK and Marubeni Corp 8002.T , is powered by coal-fired electricity, making it a big carbon emitter compared to Alcoa's plants elsewhere that are fuelled by hydropower.

Rival Rio Tinto RIO.AX RIO.L is also weighing up the future of three aluminium smelters in Australia and a smelter in New Zealand, pressing for cheaper and more reliable power, as the Australian grid becomes more dependent on intermittent wind and solar power.

AGL Energy AGL.AX , Australia's top power producer, said last month it is in talks with the Portland plant and Rio Tinto's Tomago smelter, it's two biggest customers.

"All things being equal, whether we make a dime out of it or not, we will work as a good corporate citizen to do everything we can to keep those smelters going," AGL Chief Executive Brett Redman told analysts. ($1 = 1.4736 Australian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.