Alcoa Kwinana closure: Alcoa partner Alumina in ASX halt over Kwinana refinery future

Joe Deux
The Nightly
3 Min Read
Alcoa’s decision will come a few months after new chief executive William Oplinger told analysts on an earnings call that company executives consider Kwinana a .marginal asset’.
Alcoa’s decision will come a few months after new chief executive William Oplinger told analysts on an earnings call that company executives consider Kwinana a .marginal asset’. Credit: Ian Munro/The West Australian

Alcoa is preparing to announce that production will be curtailed at one of its three WA refineries as the top US aluminium producer begins to reckon with cost-cutting measures.

Alcoa will curtail its Kwinana alumina refinery sometime this year, according to a person familiar with the decision who asked not to be identified. The Kwinana curtailment will not be a closure, the person said, noting that the facility is producing at about 80 per cent capacity.

The West Australian reported on Monday that Alcoa was poised to make a major announcement about the future of the refinery, with serious doubt hanging over the future of 1200 workers.

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Kwinana was the first of Alcoa’s three WA 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 tonnes of raw material, according to Alcoa.

The Australian business is owned by Alcoa with locally-listed Alumina as a 40 per cent partner. It has mines in the South West and refineries at Kwinana, Pinjarra and Wagerup which turn ore into alumina.

Alumina shares were placed in a trading halt on Tuesday morning “pending it releasing an announcement”.

“The securities will remain in trading halt until the earlier of the commencement of normal trading on Wednesday, 10 January 2024 or when the announcement is released to the market,” the company said.

The move comes at a time when 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 WA until it gets to its next mining phase, which analysts at Jefferies have said will be until 2027.

Alcoa’s decision will come a few months after new chief executive 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 per cent of the global output of alumina, based on global data from the London-based International Aluminium Institute.

The price of alumina has been up more than 10 per cent 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 per cent in December after the company won conditional permission for its bauxite mines in WA to keep operating.

Alcoa said in October that it initiated job cuts at the plant and that it was taking a $US6 million ($9m) charge related to “employee severance costs to be paid through the first quarter of 2024”.

The changes come just months after the more-than-century-old producer abruptly announced that Mr Oplinger would replace Roy Harvey as CEO. Mr 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.

Bloomberg

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