Slovak aluminium producer Slovalco to shut down after 70 years in business

AL Circle

Slovakia's sole aluminium producer, Slovalco, is closing its smelters after 70 years of operation. Slovalco, based in the central Slovak town of Žiar nad Hronom, stated that after decades of operation, it could no longer afford to operate its last ten remaining furnaces.  However, Slovakia will be forced to procure aluminium from foreign sources in the absence of the producer.

Slovalco shuts down after 70 years in service

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According to the Hydro majority-owned aluminium producer, the company had gradually reduced production due to the surging energy prices. Slovalco initially operated 226 furnaces, but just over a year ago, the number of furnaces in use dropped by 40 per cent due to high energy expenses. Among all industrial operations, the smelting of aluminium is the most energy-intensive industrial manufacturing process.

Milan Veselý, the Managing Director of Slovalco, said, “The Company operates based on a long-term contract concerning supplies of electrical energy when the firm began restricting its operations. We conclude long-term contracts with this type of business, which needs stability and predictability to adopt long-term solutions.”

The company also suggested that the circumstances behind the total closure may have been prevented. However, the lack of support from the ministry has forced the business owners to take this tough decision.

Slovalco said, "The shutdown of production is the result of the inaction of the government – the inaction of Environment and the former Finance Minister Igor Matovič (chair OĽaNO). During the last years, they blocked the adoption of an amendment which would have adjusted the amount of compensation for energy-intensive enterprises to the level of other industrialised EU countries."

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"We forewarned the government about the current situation, but it only intervened once it was too late. Despite Slovalco being strategically significant for Slovakia, no decision was taken because the automotive industry consumes the majority of aluminium, and demand is anticipated to rise with the entrance of Volvo in Košice", Veselý said.

Slovalco, Slovakia's largest electricity consumer, ran 133 out of 226 electric furnaces - electrolysers - in July 2022. It consumes eight per cent of the country's electricity production at full capacity.

In spite of the high price of aluminium on the stock exchange, the cost of electricity has been and still is high enough for Slovalco to lose money during 2023. Shareholders would have accepted the losses for a while, but they saw no light at the end of the tunnel.

Veselý added, "The producer does not plan to withdraw from the market permanently, despite the shutdown and lack of financial support from the government. Slovalco will attempt to maintain the factory's equipment at stable levels to allow production to restart. For this, however, the producer would still need financial support from the government."

Slovalco to operate only its remelting plant

Last summer, approximately 300 of the company's 450 employees were laid off. Another 2,500 jobs related to aluminium manufacturing were thus jeopardised. Slovalco now intends to gradually lay off its remaining employees, who have kept its furnace production and operation running.

Slovalco will continue to operate the remelting facility to process aluminium waste, established in June last year, following the closure of primary aluminium production.

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