Slovakia’s only primary aluminium producer cuts output for electricity price surge; No update on layoffs

Slovalco, the only primary aluminium producer in Slovakia, is curbing production in reaction to the steep growth of electricity prices. Record price hikes of emission allowances and insufficient compensation from the states through the Environmental Fund are some of the other factors for the output cut.

Slovalco, the majority of which is owned by global aluminium giant Norsk Hydro, produces 160,000 tonnes of aluminium annually in 226 furnaces, consuming 8 per cent of Slovakia’s total electricity consumption. Already, the company has idled 25 furnaces.

“Without long-term foreseeable and fair conditions set by the Slovak government there are very hard times in front of us,” Ola Saeter, chair of the board of directors of Slovalco, told the Slovak Radio. “The worst scenario would be turning off the furnaces and stopping production.”

A radical increase in the price of emission allowances by almost 100 per cent has affected all producers of direct CO2 emissions who are obliged to buy them. Slovalco requests the state to use the money from the sale of emission allowances to compensate them for higher prices. The compensation rate in Slovakia is only 2 per cent compared to 18 per cent in Europe. In addition, surge in electric charges makes up to 40 to 60 per cent of the company’s total production costs.

Slovalco CEO Milan Veselý expects the decision on closing the plant to come in a year or so if the state does not address the current situation. The shutdown of the smelter is estimated to affect 500 direct and 2,0000 indirect jobs.

“It would be a great pity if Slovalco, which is a top plant in the world, had to leave and the aluminium produced here was replaced by aluminium imported from Asia, for example,” Veselý told the public radio.

However, there is no plan yet to lay off the employees. The smelter has only planned to reduce production to 80 per cent next year as it has managed to secure a year-long contract of electricity at a reasonable cost.

Assurance has come from the Speaker of Parliament Boris Kollár and Labour Minister Milan Krajniak to help the smelter. As per the report, the coalition party will discuss it at the coalition council on Monday, October 4.