(Bloomberg) — Alcoa Corp. plans to fully curtail production this year at one of its three Western Australian refineries as the top US aluminum producer begins to reckon with cost-cutting measures.
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Alcoa will begin curtailment of the Kwinana alumina refinery in the second quarter, the US industrial giant said in a statement. The facility had already been running at 80% of capacity since January 2023, it said.
“We remain committed to Western Australia in the long-term and will continue to assess options for the refinery, monitoring the factors that have led to the curtailment decision,” said Matt Reed, Alcoa’s executive vice president and chief operations officer. The plant will cease all output of alumina by the third quarter.
Kwinana was the first of Alcoa’s three Western Australian alumina refineries and has been operating for about 60 years. The plant employs about 860 workers and 320 contractors and has the capacity to produce about 2.2 million metric tons of the raw material, according to Alcoa. The West Australian earlier reported that the company expected to shut the plant.
In Tuesday’s statement, Alcoa said the curtailment decision was based on a variety of factors, including the facility’s age, scale, operating costs and current bauxite grades.
Alcoa has struggled with operational and permitting setbacks in Australia for bauxite, a key feedstock for the refineries. The company also said it now plans to mine lower-grade bauxite in Western Australia until it gets to its next mining phase, which analysts at Jefferies have said will be around 2027.
Alcoa’s decision will come a few months after new Chief Executive Officer William Oplinger told analysts on an earnings call that company executives consider Kwinana a “marginal asset,” and that they would consider various options on its fate, “including curtailment or closure.”
Kwinana accounts for about 1.2% of global output of alumina, based on global data from the London-based International Aluminium Institute.
The price of alumina is up more than 10% since the beginning of December, according to data from SMM International. Alcoa’s stock fell for a second consecutive year in 2023, though it rebounded more than 26% in December after the company won conditional permission for its bauxite mines in Western Australia to keep operating.
Alcoa said in October that it initiated job cuts at the plant and that it was taking a $6 million charge related to “employee severance costs to be paid through the first quarter of 2024.”
The changes comes just months after the more-than century-old producer abruptly announced that Oplinger would replace Roy Harvey as CEO. Oplinger, in his first call with analysts as the top chief, declared a focus on “cultural change” to include faster decision-making, operational tweaks and performance improvements.
–With assistance from Martin Ritchie.
(Updates with details from Alcoa statement throughout)
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2024-01-09 01:30:00