Hydro’s Slovalco to stop primary aluminium production due to ‘high electricity prices’

Hydro’s Slovalco aluminium facility in Slovakia will stop all primary aluminium production by the end of September 2022, Hydro said on Wednesday, August 17

But the casthouse facility will continue its recycling operation, which produces 75,000 tonnes per year of recycled aluminium.

The decision to stop primary aluminium production “comes in response to adverse framework conditions and high electricity prices, which show no signs of improvement in the short term,” the company said.

“I regret that it has not been possible to secure continued operation of the primary production at the plant,” Ola Sæter, head of Hydro’s primary production and chair of Slovalco’s board of directors, said in a statement.

“Slovakia has not implemented a competitive EU CO2 compensation framework. This has prevented Slovalco from entering long-term power contracts and the plant’s current contract expires at the end of 2022. Due to the current Slovak framework conditions and the European power prices, Slovalco would incur substantial financial losses if it continued its operation beyond 2022,” Sæter added.

Slovalco previously announced a 40% curtailment of its 175,000-tpy primary aluminium capacity in December 2021 and is currently running at 60% of its capacity.

Hydro said the primary production lines would be mothballed and may resume operations at a later stage “if the market and framework conditions allow.”

Slovalco will unwind remaining hedge positions for power, metal and raw materials, which will have a positive effect on its adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) in the second half of 2022, it said.

Slovalco is majority owned by Hydro with 55.3% and 44.7% by Penta Investments Group.

The aluminium market has been bracing itself for further production cuts over the past few months as a result of high energy and electricity prices continuing to squeeze margins.

Production cuts were also seen at Alcoa’s San Ciprian smelter in Spain and Alro in Romania at the end of 2021. The cuts created tightness of primary aluminium units in Europe and coupled with logistics problems, premiums hit all-time highs.

Fastmarkets assessed its P1020A aluminium premium, in-whs dup Rotterdam at a record high of $500-510 per tonne on April 29, 2022 and stayed at that level until June 13.

Since then, premiums have dipped in Rotterdam due to weaker demand and summer slowdowns, but still remain considerably higher than the same point last year.

Fastmarkets assessed its P1020A aluminium premium, in-whs dp Rotterdam at $500-540 per tonnes on Tuesday, August 16, down from an all-time high of $600-630 per tonne earlier this year. In comparison, the premium was assessed at just $360-370 per tonne on August 17, 2021.

The production-cut news also follows announcements of industrial action in Norway. More than 1,000 aluminium workers at Norsk Hydro’s Sunndal plant and Alcoa’s Mosjøen plant are set to join a strike that has already affected Glencore’s Nikkelverk nickel refinery and Boliden’s Odda zinc smelter, according to labor union Industri Energi.

Hydro said on August 16 that as a result of the strike, production at its Sunndal aluminium plant will be curtailed by 20% in the first four weeks.

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