Alcoa cuts put Geelong jobs at risk

The future of the troubled Point Henry aluminium smelter in Geelong is again under a cloud after its American owner Alcoa revealed it was considering deep production cuts worldwide.

The future of the troubled Point Henry aluminium smelter in Geelong is again under a cloud after its American owner Alcoa revealed it was considering deep production cuts worldwide.

The smelter, which employs about 500 people, has been struggling under plunging global aluminium prices and a high dollar.

Alcoa considered shutting the smelter last year, before it received a $40 million bailout package from federal and state governments. A condition was for Alcoa to keep the plant open until at least mid-2014 as it worked on restructuring its operations.

But Alcoa said on Wednesday that with aluminium prices falling by more than a third since their 2011 peak, it was reviewing its global operations and would look to cut 460,000 tonnes - or about 11 per cent - of its smelting capacity over the next 15 months.

"Because of persistent weakness in global aluminum prices, we need to review every option to maintain Alcoa's competitiveness," Chris Ayers, president of global primary products, said. "Any action taken will only be done after a thorough strategic review and consultations with stakeholders."

Alcoa said the review would focus on higher-cost plants and plants that are deemed riskier due to factors such as energy costs or regulatory uncertainty.

With smelting operations in Australia, the US, Brazil, Canada and Europe, Alcoa said it would consider a wide variety of options, including "permanent shutdowns". The steep fall in the price of aluminium has been precipitated by a shift in production to China and the Middle East, and a resultant glut of supply.

Rio Tinto has worn $US30 billion in write-offs on its aluminium business Alcan since 2007 - seen as a big factor in Tom Albanese's departure as chief executive.

Point Henry is considered at risk because of its unprofitability and review last year, but Alcoa also owns a newer and larger smelter in Portland in Victoria, which employs about 540 people. Production at Portland is already curtailed by about 15 per cent.

The Alcoa announcement comes at a difficult time for manufacturing jobs in the Geelong region. Ford slashed more than 200 jobs from its engine plant in April last year despite also receiving extensive government assistance. Boral cut 90 jobs at its cement plant and 600 jobs hang in the balance as Shell looks to find a buyer for its oil refinery by the end of next year.

Alcoa is also considering cutting its alumina production, which could impact its Australian joint venture partner Alumina.

When asked whether it would stump up further cash to keep the Point Henry plant operating if required, a spokesman for Industry Minister Greg Combet said it was important to recognise that this was a review of Alcoa's global operations, and was not specifically aimed at the group's Australian operations. "The federal government remains committed to its agreement with Alcoa regarding the Point Henry smelter," the spokesman said.

A spokesman for Victorian Premier Denis Napthine said the Coalition government was a strong supporter of industry in Geelong and had worked with the federal government to provide assistance packages to Ford and Alcoa, as well as setting up an industry fund to help create jobs in the region. "The Coalition government has a good working relationship with Alcoa and will continue to work positively with all Geelong manufacturers," the spokesman said.

Related Articles