Writing on the wall for aluminium industry

NORSK Hydro's decision to close the Kurri Kurri smelter came as a shock to all involved, but at the same time it was no surprise.

The drums have been beating louder over a cyclical industry for some years now, and both of the Hunter Valley's smelters had already taken the scalpel to their operations in recent months.

The aluminium industry is responsible for an estimated 15 per cent of Australia's electricity output and the federal government recognised this, offering the industry billions of dollars in carbon assistance as an "emissions intensive, trade exposed" industry.

The Tomago Aluminium smelter will receive its share of assistance, but the outlook has been so bleak for Kurri that Hydro has elected to close the plant before the carbon tax takes effect.

It is impossible to tell what impact the tax will have on the remaining Australian smelters, but Hydro insists carbon is only a secondary factor behind low metal prices and the high Aussie dollar.

A graph of London Metals Exchange aluminium prices shown to Kurri workers yesterday revealed a current price of about $US2000 a tonne. Since 2007 the price has been above $US3000 and as low as about $US1300, but the big killer, says Hydro, is the currency.

Hydro senior vice-president Olaf Wigstol said he expected the currency to stay long-term at $US1.00 or even higher.

Hydro's view is similar to that expressed in this month's American Metal Market magazine, which looks at why Australia is losing its place in the world aluminium market.

Much is said about China's role in the market - and there is no doubt Chinese production is heavily subsidised - but Hydro says the country's role is overstated in this instance.

Metal Market says aluminium prices have risen by far less than almost every other metal in the past decade, and cites "rapidly expanding Chinese production" as a major factor in global oversupply.

Documents in a 2009 anti-dumping case against China run by Capral say China has been dumping aluminium products in Australia since at least 1998, costing it $250 million in profits.

Then there's Hydro's new smelter in Qatar, which produces about 585,000 tonnes a year or more than three times Kurri's production at its peak. Mr Wigstol denied the two were in competition, but there's no doubt Australia is losing its competitive advantage.

Garbis Simonian, whose Weston Aluminium business recycles the 3000 tonnes a year of dross he says is produced by the Kurri plant, offered some scathing comments last night on Australia's industrial decline.

"Successful economies like Germany are manufacturing economies, they have a balanced economy, whereas we have put all our eggs into the one basket, resources, and that is the mark of a Third World country," Mr Simonian said.

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