Smelter's competitiveness hurt as production is reduced

A large amount of aluminium business would be taken away by competitors from Queensland due to Boyne Smelter Ltd's three-month production cutback.

The smelter will be producing 14,000 tonnes less than usual from January to the end of March.

The decision to reduce aluminium production has stemmed from months of negotiations with Queensland electricity suppliers to try to secure a competitive price for 140mW of the smelter's electricity, which ended on December 31.

Workers' jobs will be safe during the cutback, as BSL managers decided natural attrition should deal with any required staff reductions.

Although production officially reduced on January 1, management said the process wasn't as simple as flicking a switch, nor was it cheap, but with the high price of Queensland power over the summer months it was still the most economic solution for BSL.

BSL general manager Joe Rea said workers had been scaling down production since mid-December.

"It's a very complex and expensive process and we've had a lot of employees working around the clock to ensure the smelter can achieve this safely," he said.

Mr Rea said it was a costly and time-consuming process that reduced the smelter's competitiveness on a global stage, but curtailing production was still the most economic solution.

"It is an ongoing concern for our business that electricity prices in Queensland are significantly higher than other states in Australia at a time when the price for aluminium in Australian dollar terms is 20% lower now than during the global financial crisis.

"Electricity prices in Queensland are currently 20% more expensive here than in New South Wales and 30% more expensive than in Victoria."

Mr Rea said he hoped the smelter could continue producing aluminium for BSL's joint-venture partners at a more competitive rate than what was available from the London Metal Exchange.

"We're confident we can come back up to full production (in April) but cutting back does concern the partners when we've just invested $750 million in the smelter," he said.

CUTTING BACK:

Production cells that have been cut out of the circuit early must be rebuilt prior to being put back into circuit.

Just over 60 reduction cells have been cut out of the circuit and the power consumption has been reduced on the rest of the cells.

Electricity has gone from the normal load of 950mW of consumption down to 870mW.

Ingots of aluminium are currently worth around (a fluctuating) US$1753 per tonne.