The Kwinana refinery has an annual nameplate production capacity of 2.2 million metric tons. The refinery has been operating at approximately 80 percent of its nameplate capacity since January of 2023.
Alcoa announces curtailment of Kwinana Alumina Refinery. (Credit: Tim Bastian from Pixabay)
Alcoa Corporation (NYSE: AA) today announced it plans to fully curtail production in 2024 at its Kwinana Alumina Refinery in Western Australia, with the process beginning in the second quarter.
The Kwinana refinery has an annual nameplate production capacity of 2.2 million metric tons. The refinery has been operating at approximately 80 percent of its nameplate capacity since January of 2023.
Matt Reed, Alcoa’s Executive Vice President and Chief Operations Officer, said the determination to curtail the 60-year-old facility is based on a variety of factors, including its age, scale, operating costs and current bauxite grades, in addition to current market conditions.
“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,” Reed 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 Western Australia’s economic development over the last 60 years of continual operation.”
The curtailment will include a phased reduction of the workforce from around 800 employees at the start of 2024 to approximately 250 in the third quarter of this year, when all alumina production will cease. Certain processes, however, will continue until about the third quarter of 2025, when employee numbers will be further reduced to approximately 50.
“We will work closely with our employees to provide support with transitioning to other opportunities,” Reed said. “This includes potential redeployment within our business or assistance to facilitate employment at other workplaces.”
The refinery and associated residue storage facilities will continue to be actively managed. Alcoa’s port facilities located alongside the refinery will continue to operate to import raw materials and export alumina produced at the Company’s Pinjarra Alumina Refinery. Production at the Pinjarra and Wagerup refineries is not expected to be impacted by the curtailment at Kwinana.
“We remain committed to WA in the long-term and will continue to assess options for the refinery, monitoring the factors that have led to the curtailment decision,” Reed said.
The Kwinana refinery recorded a net loss (pre-tax and noncontrolling interest) of approximately $130 million in 2023. The Company expects annual improvements of approximately $70 million beginning in the third quarter of 2024 as a result of the curtailment. The refinery will continue to incur approximately $40 million of non-cash depreciation, depletion and amortization expenses while curtailed.
In the first quarter of 2024, Alcoa will record restructuring charges between $180 million and $200 million, related to the curtailment of the refinery. Alcoa’s share (after-tax and noncontrolling interest) will be between $76 million and $84 million, or $0.42 to $0.47 per share. The charges include approximately $81 million for water management costs, $55 million for employee related costs, $26 million for asset retirement obligations, and $18 million of other costs. Alcoa’s share of related cash outlays of approximately $115 million (which includes existing employee related liabilities and asset retirement obligations) is expected to be spent in 2024 ($80 million) and 2025 ($35 million).
Source: Company Press Release