After curtailing one of three pot lines at its Kurri Kurri aluminium plant in January, Norsk Hydro ASA is initiating consultation with the plant's workforce with a view to curtailing the remaining operations.
"Our Kurri Kurri workforce has worked intensively to improve the plant's cost position and no stone has been left unturned. Despite extensive efforts to improve profitability, we are faced with a very challenging situation at Kurri Kurri," says Hilde Merete Aasheim, executive vice president of Hydro's Primary Metal business area.
The profitability of Hydro's Kurri Kurri plant has suffered as a result of the continued weak macro-economic conditions, with low metal prices and an uncertain market outlook, as well as the strong Australian dollar.
Following a thorough review, it is clear that the plant will not be profitable in the short term with current market prices, while long-term viability will be negatively affected by a number of factors including increasing energy costs and the carbon tax.
"The current cash losses are significant, with no sign of improvement anytime soon. We have therefore started to consult about full curtailment and will maintain a close dialogue with employees, unions and local stakeholders," says Aasheim.
Customers' contracts will be supplied through Hydro's global metal products supply system, if the Kurri Kurri plant is fully curtailed.
The Kurri Kurri plant, wholly owned by Hydro, has three pot lines with a total annual production capacity of 180,000 metric tons. Following the curtailment of one pot line in January 2012, current primary aluminium production is 120,000 metric tons.
The plant, located near Newcastle in New South Wales, currently employs 344 people. Book value of Kurri Kurri is around NOK 1.1 billion.
Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management's plans, objectives and strategies for Hydro, such as planned expansions, investments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar statements.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream aluminium business; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.
No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.