Rio Tinto May Cut Output at Tasmania Aluminum Smelter

Rio Tinto may cut output at one of its Australian aluminum smelters which is losing money due to the strong Australian dollar, high production costs and weak aluminum prices, the global miner said.

Workers at the Bell Bay aluminum smelter, part of the Pacific Aluminum business that Rio Tinto is looking to sell, are worried 600 jobs could be lost, however the company said no decision had been made to axe jobs or shut the smelter.

"The aluminum sector in Australia is facing tough market conditions in the form of a high exchange rate, higher costs of production and low aluminum prices," the general manager of the Bell Bay Aluminum smelter, Ray Mostogl, said.

Some potlines could be closed while conditions remain tough, but the company declined to confirm a report in the Australian Financial Review that workers had been told shutting the plant in two years was an option.

"We are leaving no stone unturned as we try to make Bell Bay resilient in any market conditions," Mostogl said.

Aluminum producers worldwide have been slashing output to help support the market.

In Australia, Norsk Hydro has cut a third of the output at its 180,000 tonnes-a-year Kurri Kurri aluminum plant and has warned it may have to cut more, while Alcoa is reviewing the future of its 190,000 tonnes-a-year Point Henry aluminum smelter.

Rio Tinto is negotiating a new power supply contract with Hydro Tasmania for Bell Bay from May 1 that would be key to helping cut costs at the plant, which produced 181,000 tonnes of aluminum last year.

The plant has been the focus of a loud campaign over the past year by the Australian Workers Union, which claims Bell Bay workers are paid less than workers at other aluminum smelters in Australia. The company has said the smelter pays competitive rates.
Alarm at Bell Bay rose over the past week after BHP Billiton announced it was suspending production and conducting a review at its TEMCO manganese alloy smelter, near the Bell Bay plant, as the strong currency and rising operating costs have made the business uncompetitive.