Global aluminum supplier Norsk Hydro yesterday announced plans to cut the capacity of its Australian New South Wales-based Kurri Kurri smelter by 33 percent citing low metal prices as the main reason for its decision.
Hydro may close down one of the smelter’s three potlines, which is said to have a capacity to produce about 180,000 metric tons of aluminum annually to curtail the operation is currently running at a loss, Halvor Molland, a spokesman for the company told Bloomberg.
The decision is part of Hydro’s plan to restructure its aluminum operations in Australia, which includes the Kurri Kurri smelter and the Tomago Aluminium plant. An estimated 250 jobs is expected to go in the region should the restructure go a head.
Hydro is currently in talks with the smelter’s 500 employees. The talks are expected to last a week.
The company has yet to confirm which employees, based on salary and wage category, will make up the redundancies, but said that it will work with unions, employees and the community throughout the reduction in production.
Australian Workers’ Union (AMU) Newcastle Branch Secretary Richard Downie has welcomed the aluminum supplier’s commitment to working with the union help to minimise the impact of redundancies on its members.
"The union will be working hard to ensure our members facing the awful reality of job losses will receive the best redundancy package possible – as well as access to the pathway program to help secure their future employment prospects,” Downie said in a statement.
The government has also put its support behind the workers, however it will not provide a bailout of the smelter, similar to that put forward for the automotive industry.
During a visit to the smelter, Hunter Valley MP Joel Fitzgibbons told the Newcastle Herald "the point I make is companies come to the government with proposals for assistance, governments don’t go to companies".
"The only thing that turns this situation around is easing in the value of the Australian dollar or a rise in the international price of aluminium.
"None of us have any control over those issues."
However, the news remains nonetheless distressing for workers and the Australian manufacturing industry as a whole.
The announcement is devastating for the families of more than 250 workers who will be feeling the pain that comes with the loss of a secure income,” Downie said.
"At the same time, it’s another reminder of the crisis facing Australian manufacturing – the worst we’ve seen since the Great Depression."
In addition to a high dollar and record high terms, local aluminium manufacturers are now also facing added pressure of a drop in aluminium prices globally. Global demand for aluminium this week is weaker compared with the same period in 2011. Last year also saw an 18 per cent drop in demand as global economic growth slowed.
Continued weakening of global aluminium demand and Hydro’s decision to cut production at its Australia aluminium operation serves as yet another wake-up call to governments across the board to take more action to support domestic manufacturing, Downie said.
Hydro will finalise restructure plans for the primary aluminium plant Tomago Aluminium, which it is a part-owner by mid-year.
Norway-based Hydro is a global supplier of aluminium, including bauxite extraction to the production of rolled and extruded aluminium products and building systems. The company employs approximately 23,000 people in more than 40 countries.
In Australia, Hydro is present with primary aluminium production and metal products operations.
Majority of Hydro’s employees in Australia are employed at the company’s site in Kurri Kurri, near Newcastle in New South Wales. The primary metal plant in Kurri Kurri began operations in 1969.
Hydro became owner of the Kurri Kurri plant through its 2002 acquisition of VAW aluminium AG.