Alcoa to shut down Kwinana refinery that employs 1100 workers

US miner Alcoa will stop producing alumina at its loss-making Kwinana refinery by September, leading to the loss of 550 direct jobs with another 200 to go in the following 12 months.

Alcoa chief operations officer Matt Reed on Tuesday said the decision was driven by the age of the 60-year-old plant, its small size, high operating costs, low bauxite grades currently being mined and a poor market for the aluminium ingredient it produces.

“Today’s curtailment decision comes only after thorough and careful deliberation, and we acknowledge that this action will impact workers, business partners, and the community,” he said.

“We deeply appreciate the commitment and support of our many loyal employees, contractors, and suppliers at our Kwinana refinery, which has made a major contribution to WA’s economic development over the last 60 years.”

About 50 employee positions will remain to actively manage the site for Alcoa. Some workers from the Kwinana plant will be redeployed to other Alcoa refineries in Pinjarra and Wagerup.

Alcoa’s statement made no mention of the about 300 contractors that work at Kwinana.

The Kwinana plant lost about $US130 million ($193 million) in 2023.

Mike Ferraro, chief executive of ASX-listed Alumina Limited that owns 40 per cent of Alcoa’s Australian operation, said it cost $US410 to make a tonne of alumina at Kwinana in 2023, but the current price was about $US360 a tonne.

In contrast, Alcoa’s two other WA refineries – Pinjarra and Wagerup – produced alumina for about $US250 a tonne last quarter.

WA Premier Roger Cook, who is also the local member for Kwinana, said the curtailment was a disappointing outcome.

“Alcoa needs to do everything it can to support its workforce through this transition,” he said.

“Kwinana is the industrial heart of Perth, and has a bright future with new job-creating industrial
projects emerging on the strip.”

Federal resources minister Madeleine King said she was extremely disappointed at the closure of the plant in her electorate.

“I have been assured by Alcoa that the curtailment of production at the Kwinana refinery will not affect the broader supply chain of alumina, which is essential for our future transition towards net-zero emissions,” she said.

Reed said Alcoa remained committed to WA and would continue to consider options for the refinery. The refinery’s port facilities will still be used to export alumina from Pinjarra and import raw materials such as caustic used in the alumina-making process.

A tarnished environmental record

Tuesday’s announcement comes after 12 months of damaging revelations about the Pittsburgh-based company’s operation in WA where it produces more than 70 per cent of its bauxite and alumina.

Its clearing of the jarrah forest has in recent years moved closer to Serpentine Dam, Perth’s biggest source of drinking water, prompting concern that heavy rainfall could wash sediment from the large areas devoid of vegetation into the dam, making the dam’s water treatment facilities ineffective.

A Water Corporation internal briefing note from 2022, obtained via a freedom of information request, said Alcoa’s mining was a “very significant intergenerational risk to water quality and security of supply in drinking water catchments.”

Alcoa has produced alumina at Kwinana since 1963.Credit: Alcoa

The utility said the worst-case cost of fixing all the dams that could be affected by Alcoa’s mining was $2.6 billion and would result in the doubling of water bills.

“Mining operations have not been effectively regulated,” the note said.

Alcoa was also caught building a pipeline over a Water Corporation dam near Waroona, in WA’s south-west, to carry water contaminated with the toxic “forever chemical” PFAS despite not having regulatory approval.

The state environment regulator found the design and construction of the pipeline was substandard, making a leak a real possibility.

Alcoa has cleared 28,000 hectares of jarrah forest in 60 years and has long trumpeted its care of the forest that extends from inland of Perth to Collie 200 kilometres to the south.

However, in March this masthead revealed Alcoa has not fully rehabilitated a single hectare to the standards agreed with the state government.

The miner has been considering the closure of Kwinana for many years, according to several sources familiar with Alcoa’s WA operation but not authorised to speak to the media.

The plans precede Alcoa’s problems in the past two to three years getting approval to clear jarrah forest due to concerns about the water supply that forced the Kwinana refinery to run at 80 per cent capacity for the past year.

In December, the state government implemented temporary arrangements to govern Alcoa’s mining that Premier Roger Cook said strengthened environmental protection while supporting local jobs.

WA Forest Alliance camping director Jess Beckerling said piecemeal concessions to protect forests, cockatoos and water were “just small scraps off Alcoa’s table”.

Beckerling said before the EPA could even start its assessment of Alcoa’s mining, Cook had told the company,“you can keep mining”.

The arrangements will remain in place until the WA Environmental Protection Authority completes a review of its current mining that could take several years.

Alcoa first publicly raised the prospect of change at Kwinana in October 2023 when new chief executive Bill Oplinger told Wall Street analysts the company was looking at a variety of ways to drive down costs and improve profitability at the 60-year-old plant.

“But ultimately, as with any marginal asset, and Kwinana is a marginal asset at this point, we’ll consider options on the table, including curtailment and closure,” he said.

Cook said at the time that local workers deserved better.

“Alcoa’s commentary today is disappointing and creates unnecessary uncertainty for their workforce,” he said.

Possible pressure release for other industry

The announcement is positive for other WA industry on three fronts where they are stretched: labour, industrial land and gas supply.

There is a shortage of skilled workers throughout WA and experienced process operators and maintenance workers from the refinery would be in high demand from employers such as Tianqi and Covalent, who are building lithium processing plants in Kwinana.

The refinery occupies 1500 hectares of prime waterfront industrial land in Kwinana where the last available large parcel was allocated in 2023 to miners Fortescue and IGO to build a battery materials plant.

However, expensive demolition and decontamination work would be needed before any of the refinery’s lease could be to put to other uses.

Alcoa accounts for about 25 per cent of gas demand in WA that is facing a shortfall in supply of about 8 per cent of demand over the next three years, according to the Australian Energy Market Operator.

A complete closure of Kwinana, Alcoa’s smallest refinery in WA, would free up gas equivalent to about five per cent of the market and be a welcome relief to other users.

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