Alcoa's Australian smelter needs cheaper power to stay open past 2021
2019-12-06 10:46:27 [Print]
Alcoa Corp will need cheaper, more reliable power to keep its Portland smelter in Australia open beyond 2021 when its current supply deal ends, the aluminum major's partner said on Thursday.
Alumina Ltd., 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. It's well run, and it's a relatively new smelter," Ferraro said, "Ideally, we would like to renegotiate a new power contract at a lower price."
The power contract for the Portland smelter, which consumes about 10% of the state of Victoria's electricity, ends in mid-2021.
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 aluminum 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 that 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 aluminum producers.
The Portland plant, co-owned by AWAC, CITIC and Marubeni Corp, 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 is also weighing up the future of three aluminum 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, 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.
Alumina Ltd., 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. It's well run, and it's a relatively new smelter," Ferraro said, "Ideally, we would like to renegotiate a new power contract at a lower price."
The power contract for the Portland smelter, which consumes about 10% of the state of Victoria's electricity, ends in mid-2021.
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 aluminum 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 that 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 aluminum producers.
The Portland plant, co-owned by AWAC, CITIC and Marubeni Corp, 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 is also weighing up the future of three aluminum 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, 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.
Alumina 98.5%min FOB Australia
Unit:USD/mt
China alumina producers' number MoM output increase statistics by province by month
Unit: pcs
