Alcoa curtails Kwinana refinery production

Alcoa Corporation (NYSE:AA) plans to fully curtail production at its Kwinana Alumina Refinery in Western Australia during Q2 2024 after more than 60 years of production. 

The Kwinana refinery currently has an annual nameplate production capacity of 2.2 million tonnes and has been operating at about 80% of capacity since January 2023. 

Alcoa reports the refinery recorded a net loss of about $130 million in 2023, however, expects annual improvements of about $70 million beginning in the Q3 2024 as a result of the curtailment. 

The curtailment will include a phased reduction of the workforce from around 800 employees at the start of 2024 to about 250 in the third quarter of the year, when all alumina production will cease. 

Alcoa notes certain processes will continue until the Q3 2025, when employee numbers will be further reduced to about 50. 

Production at Alcoa’s Pinjarra and Wagerup refineries is not expected to be impacted by the curtailment at Kwinana. 

Both these refineries demonstrate average cash costs for production of $250 per tonne in Q4 2023 and remain ‘strongly’ cash flow generative at current API prices. 

Western Australia Premier Roger Cook has called the halt in production as disappointing for the state and local employment. 

ASX-listed Alumina (ASX:AWC), which owns 40% of the Alcoa World and Chemicals (AWAC) entities (part of the Alcoa bauxite and alumina business segments and a joint venture (JV) between both parties), states the alumina market is currently in tight supply, compounded by recent production cuts in China.

Alcoa Executive Vice President and Chief Operations Officer (COO) Matt Reed says the facilities age, scale, operating costs, current bauxite grades, and current market conditions were all factors which formed the decision to curtail production.

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. 

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 Western Australia’s economic development over the last 60 years of continual operation.”

Alumina Chief Executive Officer (CEO) Mike Ferraro says the company fully supports Alcoa’s decision given the losses incurred at Kwinana.

“The announcement today that production will be curtailed at Kwinana follows 2 key announcements in December 2023 — the approval of mining permits in WA and Alcoa’s decision to take action at the San Ciprian refinery to further reduce losses there and work towards a long-term solution. 

The combination of these actions provides AWAC with a strong foundation to move forward to create a significantly higher quality refinery portfolio and benefit from the positive long-term outlook for the alumina market.” 

As part of the curtailment, the refinery, along with associated residue storage facilities, will continue to be actively managed.  

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Images: Alcoa
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Written By Adam Drought
Born and raised in the UK, Adam is a sports fanatic with an interest in Rugby League and UFC/MMA. When not training in Muay Thai and Brazilian Jiu Jitsu, Adam attends Griffith University where he is completing his final year of a Communication & Journalism degree.