Alcoa will permanently close the Point Henry aluminium smelter in Victoria, Australia, in August this year, the company said on Monday February 17.

An adjacent rolling mill will also be closed, as well as another rolling mill in New South Wales. Alcoa will lose 190,000 tpy of primary aluminium production and 200,000 tpy of can sheet capacity with the closures.

“Despite the hard work of the local teams, these assets are no longer competitive and are not financially sustainable today or into the future,” ceo Klaus Kleinfeld said in a statement.

The loss-making Point Henry smelter was put under review in February 2012, when Alcoa of Australia md Alan Cransberg first raised the possibility of production cuts at the smelter.

“A comprehensive review found that the 50-year-old smelter has no prospect of becoming financially viable,” Alcoa said.

In June of that year, Alcoa said it would keep the operation open until at least mid-2014, but market conditions have not improved to the point of extending that closing date.

The provision of more than $40 million to the operation by the Australian federal government and the state government in Victoria over the past two years has not been enough to stave off rock-bottom London Metal Exchange prices and rising costs.

“We appreciate the ongoing support of the Australian and Victorian governments and will continue to work closely with all levels of government, our employees, unions and community stakeholders to manage through these changes,” Cransberg said in a statement.

The company will now seek a buyer for the Anglesea coal mine and power station that has supplied about 40% of Point Henry’s energy needs. Alcoa still operates the Portland aluminium smelter in Victoria, as well as bauxite and alumina operations in Western Australia.

Restructuring costs associated with the closures are expected to be about $250-270 million, with about $160 million of those costs coming in 2014. Following the closure, Alcoa will have idled about 17%, or 655,555 tpy, of its aluminium smelting capacity in response to poor market conditions over the past few years.

Jethro Wookey
Twitter: @jethrowookey_mb