June 29, 2012 / 3:28 AM / 6 years ago

Alcoa says grant to help keep Aus smelter running

CANBERRA (Reuters) - Alcoa (AA.N) on Friday said it expects to keep its Point Henry aluminum smelter in Australia operating until at least mid-2014 but warned losses at the 190,000-tonnes-per-year plant were mounting as market conditions deteriorate.

The news coincides with the granting of a government assistance package totaling more than A$40 million aimed at preserving most of the 600 jobs at the smelter as Alcoa grapples with a severe downturn in market conditions and reviews its aluminum-making operations worldwide.

“The way things are right now, two years is a long time in our industry,” Alcoa of Australia Managing Director Alan Cransberg said in a statement.

“No one can predict exactly what’s going to happen with the global economy or where exchange rates and the price of aluminum will move,” he said.

When the review was announced, the smelter was facing substantial losses, Cransberg said.

“Since then global market conditions, such as exchange rates and the aluminum price, have made the situation worse,” he said.

Norsk Hydro (NHY.OL) last month said it was shutting its 180,000-tonnes-per-year Australian aluminum smelter, also citing low metals prices and a dismal economic outlook.

The country’s smelters have been hammered by high costs that make it difficult to compete with Chinese producers, as well as falling metals prices.

With the overhang of high inventories and a 20 percent drop in prices since March, aluminum producers are losing money. Benchmark three-month London Metal Exchange aluminum stood at $1,855 a metric ton on Friday.

Production cuts aimed at attacking a global supply glut total around 1 million metric ton worldwide so far this year.

Alcoa has ruled out Australia’s looming carbon tax on emissions playing a major role in adding to future losses at the smelter.

The tax takes effect on July 1. Under the plan, the carbon price will be set at A$23/metric ton for three years, before moving to a full trading scheme with a floating price from July, 2015.

Reporting By Maggie Lu Yueyang and James Regan; Editing by Eric Meijer

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