UPDATE: Alcoa Reviews Australia Aluminum Smelter, May Halt Output
February 07 2012 - 6:56PM
Dow Jones News
Alcoa Inc. (AA) joined the ranks of international companies
casting doubt on the future of some Australian operations
Wednesday, after pressures including the high Australian dollar
prompted it to put an aluminum smelter under review.
Alcoa said its aim was to keep the Point Henry smelter in
Victoria state open, but that it may shut down production if
profitability targets aren't met. The review is set to last until
the end of June, when a final decision will be made.
"A combination of factors, including metal prices, input costs
and exchange rates, have resulted in the Point Henry smelter
becoming unprofitable," said Alan Cransberg, managing director of
Alcoa of Australia, in a statement.
Point Henry, which started operations in 1963, produces around
190,000 metric tons of aluminum a year. Together with another Alcoa
smelter at nearby Portland, the units account for around 30% of
Australia's aluminum production.
Over half of the aluminum--used in products ranging from soft
drinks cans to aircraft--from the Point Henry smelter is
exported.
Victoria is Australia's manufacturing heartland but is being
squeezed by the impact of the rising Australian dollar, which
Tuesday hit a six-month high against the greenback above $1.08. The
local currency has now risen by about 80% since 2008 when it
reached a trough during the financial crisis.
The Australian dollar has been driven up by investors seeking a
proxy to China's boom, as Australia is a vital supplier of
commodities such as coal and iron ore, but officials worry that it
exposes the economy Down Under to a bust if Chinese demand dries
up.
In a speech Feb. 1, Prime Minister Julia Gillard warned
manufacturers and exporters that the currency was likely to stay
relatively high for several years.
Victoria's problems are compounded by few natural resources that
can offset the decline in manufacturing by generating mining jobs
and revenue.
Toyota Motor Corp. (TM) said Jan. 23 it was laying off 350
workers at its plant in Altona, Victoria, in large part because the
Australian dollar is making car exports uncompetitive. The cuts
were equivalent to 7% of its Australian staff.
General Motors Co. (GM) has also shed 100 casual and temporary
staff in South Australia state, while H.J. Heinz Co. (HNZ) has
closed a plant in Victoria and BlueScope Steel Ltd. (BSL.AU) has
shuttered production units in New South Wales state.
"Together with our employees, we have worked hard to minimise
costs and improve margins, but the current situation makes it
difficult for Point Henry to be globally competitive in the
foreseeable future," Cransberg said.
The associated aluminium rolling mill at Point Henry and
Anglesea power station aren't included in the review, he said.
Cransberg added the review hasn't been triggered by Canberra's
move to put a price on carbon. Although the carbon tax would add a
new cost to the business, the smelter was already losing money, he
said.
-By David Winning, Dow Jones Newswires; +61-2-82724688;
david.winning@dowjones.com
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