Alcoa cuts put Geelong jobs at risk
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.
Frequently Asked Questions about this Article…
Alcoa said it is reviewing its global operations and plans to cut about 460,000 tonnes (roughly 11%) of smelting capacity over the next 15 months. The move is driven by a more than one‑third fall in aluminium prices since their 2011 peak and a global supply glut, so investors should see it as a sign the company is trying to protect margins by targeting higher‑cost or riskier plants.
Yes — the Point Henry smelter in Geelong is considered at risk because it has been unprofitable and was already reviewed last year. Alcoa had previously considered shutting it before receiving a $40 million federal and state bailout, with a condition to keep the plant open until at least mid‑2014. The current global review puts its future under further uncertainty.
Point Henry employs about 500 people. Alcoa also owns a larger Portland smelter in Victoria that employs about 540 people and is already curtailed by around 15%. The article also notes wider local manufacturing pain, including more than 200 jobs cut at Ford's engine plant, 90 jobs at Boral's cement plant and about 600 jobs potentially affected at Shell's refinery sale.
Alcoa said its review will focus on higher‑cost plants and those at risk because of energy costs or regulatory uncertainty. Options include production curtailments, permanent shutdowns and potentially cutting alumina production — all of which it will consider after strategic review and stakeholder consultations.
Aluminium prices have fallen by more than a third since their 2011 peak. The article attributes the steep fall to a shift in production to China and the Middle East, creating a global glut of supply. That weaker price environment is the main reason Alcoa is reviewing capacity and cost structures.
The federal government has said it remains committed to its agreement with Alcoa on the Point Henry smelter, but a spokesman for the Industry Minister emphasised the announcement is part of a global review and not specifically aimed at Australian operations. Victorian government spokespeople said they have worked with the federal government to provide assistance packages in the past, but no new funding commitment was announced in the article.
For investors, the review signals operational and earnings risk for Alcoa and could also affect Alumina if Alcoa reduces alumina production. Potential outcomes — curtailments, shutdowns or restructuring — can impact revenues, local jobs and regional supply chains, so investors should monitor Alcoa's strategic review updates and any government responses.
Yes. The article notes that Rio Tinto has taken about US$30 billion of write‑downs on its aluminium business Alcan since 2007, contributing to leadership changes there. That history, combined with current price weakness and oversupply, shows the sector as a whole is facing significant structural challenges.
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