Alcoa’s Portland aluminium smelter placed under review

Victorian government told to prioritise affordable power, amid doubts over the Portland plant.

Alcoa employee Mark Burridge outside the Alcoa aluminium smelter in Portland Victoria. Picture: David Geraghty

Energy Minister Angus Taylor has called on the Andrews government to prioritise affordable, reliable power, amid doubts over the future of the Portland aluminium smelter in Victoria’s south west, which consumes about 10 per cent of the state’s power.

In its third-quarter earnings results released on Wednesday night, US aluminium giant Alcoa, which operates the Portland plant, said it planned to restructure its global portfolio, placing under review “1.5 million metric tons of smelting capacity and 4 million metric tons of alumina refining capacity.”

“The review will consider opportunities for significant improvement, potential curtailments, closures or divestitures,” Alcoa said.

The company did not name Portland, but chief executive officer Roy Harvey told analysts on an earnings call on Wednesday night the smelters in focus would be those where Alcoa had already curtailed capacity.

“The review numbers that we’ve provided are for both operating capacity and currently curtailed capacity, so all of that capacity would be under review,” he said.

That list included Portland, where 15 per cent of the smelter’s annual capacity is idled, as well as facilities in Brazil, Canada, and three of Alcoa’s US operations. The annual capacity of all of those smelters combined is 1.5 million tonnes.

Alcoa also declared its ambition to become “the lowest emitter of carbon dioxide” among the world’s aluminium companies, adding to the clouds over Portland’s future, given it draws power from the Victorian grid, which is heavily reliant on brown coal from the Latrobe Valley.

Mr Taylor said that of all energy intensive industry, smelters were “particularly sensitive” to electricity reliability and price.

“The Australian government is already engaging with NSW and QLD on the future of their domestic smelters,” he said.

“The future challenges facing the Victorian energy grid are well-known.

“The Andrews government needs to prioritise the affordability and reliability of their grid, and ensure their thermal generators stay in the market, running at full tilt, to ensure the viability of Victorian industry into the future.”

AWU Victorian branch secretary Ben Davis also highlighted the importance of affordable power, saying he had sought assurances from Alcoa that jobs would not be lost.

“The review will take its course,” Mr Davis said.

“In the meantime, Alcoa will be seeking negotiations around their power contract, which expires in mid 2021.”

Mr Davis said the aluminium industry was facing challenges and the review did not come as a surprise.

“The AWU are committed to doing whatever it takes to keep the place open,” he said.

“To see Alcoa close in Portland would be a catastrophic hit to the economy in south west Victoria, which none of us want to see.”

In 2017 the Andrews government provided $200m over four years to ensure Portland would continue to operate until at least 2021.

The federal government has also contributed $30m to guarantee operations through to June 2021.

In response to extensive questions about the future of the Portland smelter, an Andrews government spokeswoman said: “This is a matter for Alcoa”.

Liberal MP for the state seat of South West Coast Roma Britnell said the Andrews government’s policies had forced electricity prices “sky high” and placed enormous pressure on the Portland smelter.

“Daniel Andrews can’t sit on his hands, he must act and support Alcoa to make the Portland smelter is sustainable,” Ms Britnell said.

“The potential closure of the Portland smelter would be devastating for the community.

“The Premier must step up and work with Alcoa to ensure ongoing sustainability and drive down energy costs.”

Federal Industry Minister Karen Andrews said Alcoa had not identified any specific operations that were likely to be affected by its review.

“It’s premature to speculate about the future of its Portland smelter,” Ms Andrews said.

Education Minister Dan Tehan, whose electorate of Wannon includes Portland, said he would continue to work with Alcoa to ensure its long term sustainability.

“The smelter provides hundreds of jobs in our community and I’ll be doing everything I can to secure those jobs for the long term,” Mr Tehan said.

“I’ve spoken to Portland senior management and they have assured me that their focus is also on securing the long term sustainability of the smelter.”

The Alcoa asset review is unlikely to affect the company’s WA bauxite and alumina operations, all of which are operating at full capacity despite gloomy conditions for the industry.

But a structural review of the company’s operations, which has already seen the departure of Australian managing director Michael Parker and bauxite president Garret Dixon, could still lead to WA job losses as the company consolidates its sales, procurement, finance and human resources staff into central units.

The threat to Portland adds to Australia’s refinery woes, with Rio Tinto still mulling the future of its own operations in Gladstone and Newcastle in the face of high energy costs.

Rio boss Jean-Sebastien Jacques said the operations were on “thin ice” at the company’s half-year results release, saying a fix needed to be found for spiralling energy costs.