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Smelter closure good for Australia

By Matthew Wright - posted Wednesday, 15 February 2012


It went onto explain the impact of a rising Australian dollar and how this did not stop the local operations from continuing to be "among the lowest cost asset" in the Alcoa Inc portfolio.

Alcoa Inc said back then: "The value of the Australian dollar escalated throughout 2010, hovering in the high nineties and even hitting parity with the U.S. dollar late in the year. With operating costs in Australian dollars and product sold in U.S. dollars, costs of alumina and aluminum production in Australia rose significantly.

"Despite this, Alcoa of Australia's facilities remained at the low end of the global cost curve at the end of 2010."

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In 12 months, why has this assessment changed and if the Australian facilities were an outperformer, what does this spell for the corporation's other facilities and how is it that Alcoa Inc is still making money hand over fist?

The average value of the Australian dollar since this assessment, over the past 14 months, has been $1.03. Just slightly higher than parity.

How is it possible that an appreciation of around 3 per cent in the currency from the time of the assessment would be enough to make Point Henry sufficiently uneconomic to close down?

There are just too many discrepancies for Alcoa to justify.

Now, backtrack to Alcoa Inc's forecast of a 7 per cent surge in demand for aluminium in 2012 and you can see why German companies, among others, are continuing to invest in efficient smelters.

GDA, the nation's industry association is equally bullish.

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Last month (January), GDA cited a McKinsey & Co report that forecast that regulations to limit emissions from European cars will force car makers to increase from 30 per cent to 70 per cent the quantity of light weight materials used in auto manufacture.

The regulations, which begin to tighten from 2015, will require emission-free electric drives and batteries that are heavy. To compensate for the extra weight, cars will increasingly rely on lighter materials such as aluminium for other parts.

Estimates put the expanded market at 300 billion euros by 2030.

Is it possible for Mr Abbott and Mr Hunt to see the irony in the GDA report's headline: "CO2 regulation to trigger growth in aluminium"?

Is it impossible for Ms Gillard to squash unjustified rent-seeking and call Alcoa's bluff?

Let's hope all politicians dig a little deeper for the truth before giving in again to multinational corporations crying poor.

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About the Author

Matthew Wright is Director of Beyond Zero Emissions and Young Environmentalist of the Year.

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