Alcoa to curtail output at Australian Alumina plant to cut costs

2024-01-10

Jan. 9, 2024 - Alcoa Corp. is preparing to announce that production will be curtailed at one of its three Western Australian refineries as the top US aluminum 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 since they aren’t authorized to speak publicly about the matter. The Kwinana curtailment will not be a closure, the person said, noting that the facility is producing at about 80% capacity.

Kwinana was the first of Alcoa’s three Western Australian 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 metric tons of the raw material, according to Alcoa. The West Australian earlier reported that the company expected to shut the plant.

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 Western Australia 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 Officer 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% of global output of alumina, based on global data from the London-based International Aluminium Institute.

The price of alumina is up more than 10% 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% in December after the company won conditional permission for its bauxite mines in Western Australia to keep operating.

Alcoa said in October that it initiated job cuts at the plant and that it was taking a $6 million charge related to “employee severance costs to be paid through the first quarter of 2024.”
The changes comes just months after the more-than century-old producer abruptly announced that Oplinger would replace Roy Harvey as CEO. 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.