Kwinana Alumina Refinery Faces Closure as Alcoa Ends Operations

Alcoa Corporation has revealed its strategic decision to cease production at the Kwinana Alumina Refinery in Western Australia in 2024, initiating the process in the second quarter. The facility, with a 60-year history, boasts an annual nameplate production capacity of 2.2 million metric tons and has been operating at approximately 80 percent of its nameplate capacity since January 2023. Alcoa's Executive Vice President and Chief Operations Officer, Matt Reed, stated that the closure is influenced by various factors, including the facility's age, scale, operating costs, current bauxite grades, and prevailing market conditions.

The phased reduction of the workforce is an integral aspect of the curtailment plan, with around 800 employees at the beginning of 2024 gradually decreasing to approximately 250 by the third quarter, coinciding with the cessation of all alumina production. Despite this decision, Alcoa reassures that its port facilities adjacent to the refinery will continue operations, facilitating the import of raw materials and the export of alumina produced at the Company's Pinjarra Alumina Refinery.

Notably, the curtailment at Kwinana is not expected to impact production at the Pinjarra and Wagerup refineries. These facilities will continue their operations unaffected by the changes at the Kwinana site. The decision to cease production at the Kwinana refinery is attributed to a combination of factors, reflecting Alcoa's strategic evaluation of its assets and market dynamics.

The financial performance of the Kwinana refinery has been challenging, recording a net loss of approximately US$130 million in 2023. In response to the curtailment decision, Alcoa anticipates recording restructuring charges between US$180 million and US$200 million in the first quarter of 2024. These charges are directly associated with the planned closure of the refinery and reflect the company's commitment to addressing the financial implications of the decision.

Alcoa's move to curtail operations at the Kwinana Alumina Refinery aligns with broader considerations within the aluminum industry, where companies strategically reassess their portfolios to enhance competitiveness and adapt to evolving market conditions. The age of the facility, coupled with scale and operating cost considerations, has led Alcoa to make this strategic decision in the face of changing dynamics within the industry.

As the company navigates the curtailment process, a phased reduction in the workforce is designed to manage the transition and minimize the impact on employees. Alcoa's commitment to maintaining operational continuity at its port facilities underscores its broader strategy of optimizing its overall supply chain and ensuring uninterrupted raw material imports and alumina exports.

While the closure of the Kwinana refinery marks the end of an era for this facility, Alcoa continues to operate and invest in its other refineries, emphasizing the sustainability and resilience of its overall operations. The decision is a part of Alcoa's proactive approach to refining its portfolio, ensuring competitiveness, and aligning with the dynamic landscape of the aluminum industry.

Alcoa's announcement to cease production at the Kwinana Alumina Refinery reflects a strategic move driven by multiple factors, including the facility's age, scale, operating costs, bauxite grades, and market conditions. The phased reduction in the workforce and restructuring charges are integral components of this strategic curtailment, demonstrating the company's commitment to managing the transition responsibly. As Alcoa focuses on the future and optimizing its operations, the closure of the Kwinana refinery is a significant step in aligning with evolving industry dynamics and ensuring sustained competitiveness in the aluminum sector.