Carbon tax cited in threat to Hunter Valley smelter

Carbon tax cited in threat to Hunter Valley smelter

Carbon tax cited in threat to Hunter Valley smelter

THE operators of the Hunter Valley’s Kurri Kurri aluminium smelter have flagged the closure of the plant, saying the carbon tax and other factors threaten its long-term profitability.

Norwegian-based Norsk Hydro said a review of the smelter’s operations had confirmed the plant would not be profitable in the short-term, while “the long-term viability will be negatively affected by a number of factors including increasing energy costs and the carbon tax”.

The company has been examining the future of the Kurri Kurri plant’s two remaining potlines, after the earlier closure of a third potline.

It said today profitability had been hit by continued weak macro-economic conditions, low metal prices and an uncertain market outlook, as well as the strong Australian dollar.

“The current cash losses are significant, with no sign of improvement anytime soon. We have therefore started to consult about full curtailment and will maintain a close dialogue with employees, unions and local stakeholders,” Hydro’s Primary Metal division vice president Hilde Merete Aasheim said.

The plant, near Newcastle, employs 344 people.

Tony Abbott said the announcement was clear evidence that the carbon tax was harming the economy.

“The wrecking ball is starting to swing through our economy. The only way to stop it is to repeal the tax and the only way to repeal the tax is to change the government,” the Opposition Leader said.

But Climate Change Minister Greg Combet – who also represents the region as its local MP – said the key uncertainty over Kurri Kurri’s future was the failure of the NSW government to strike a long-term electricity supply agreement with the company.

He said the looming $23 a tonne carbon price, which comes into effect on July 1, would have a relatively small impact on aluminium prices.

“The government is providing assistance to aluminium smelters so that aluminium smelting will only face an average carbon price of $1.30 per tonne of emissions for the core smelting activity.

“This means that the effect of the carbon price on the cost of producing a tonne of aluminium is similar to the effect of a 1c increase in the value of the Australian dollar.

“The value of the dollar has fallen by around 8c in recent weeks.”

Norsk Hydro also cited the strong Australian dollar when it said in February that production at Kurri Kurri was unprofitable under prevailing market conditions.

The company recently announced a write-down of the plant by 970 million kroner ($157 million).

The writedown weighed heavily on the company’s fourth-quarter results, with Norsk Hydro swinging to a net loss of 749m kroner from a net profit of 620m kroner last year.

Norsk Hydro, Europe’s largest aluminium producer, shut down about 25 per cent of its overall capacity after the global financial crisis in 2008, and most of this is still idle.

The closure of one of the three production lines at the Kurri Kurri plant reduced output by 60,000 tonnes a year from a full capacity of 180,000 tonnes a year.

A number of aluminium plants across the nation are also reviewing their operations.

Alcoa is examining the viability of its Point Henry aluminium smelter in Victoria, while Rio Tinto is reviewing its Bell Bay aluminium smelter in Tasmania.

The Australian Workers’ Union said the Kurri Kurri smelter’s looming closure showed the aluminium industry was in crisis.

“A record high Australian dollar and low metal prices have been lethal for the Kurri Kurri smelter,” AWU assistant national secretary Scott McDine said in a statement.

“This lethal combination has resulted in a devastating and shocking outcome for the entire 350-strong workforce, their families and the entire community.”

He said the union would on Friday meet with the federal government for urgent talks on the Kurri Kurri plant and the “worsening crisis” in the Australian aluminium industry.

“We will do everything we can to make sure our members receive all the support they need through what will be a very tough time,” he said.