Alcoa Kwinana closure: Announcement on alumina refinery’s future ‘imminent’ with 1200 workers’ jobs in limbo

Alcoa is poised to make a major announcement about the future of its Kwinana alumina refinery, with serious doubt hanging over the future of 1200 workers. Multiple sources believe the US industrial giant has decided to shut the plant, which was described as “marginal” by incoming Alcoa chief executive Bill Oplinger in October. An official announcement is understood to be imminent. When asked whether Alcoa had opted to close down the refinery, a company spokeswoman referred The West Australian to Mr Oplinger’s previous commentary. She refused to deny speculation a decision had already been made to close the facility. “Kwinana Alumina Refinery faces a range of challenges as outlined by our CEO during our Q3 earnings update,” she said. The 60-year-old Kwinana plant occupies about 1500ha of prime land within the increasingly constrained Kwinana Industrial Area. The West Australian understands Alcoa has had multiple suitors for the site on which it sits, with a range of companies eager to secure a major patch of land within the KIA. According to an Alcoa fact sheet, the refinery employees 860 workers directly as well as another 320 contractors. More than half of those workers live locally in Kwinana, Cockburn and Rockingham. Refinery workers who spoke to The West Australian as they exited the facility on Monday said they remained completely in the dark about their future and had heard “nothing” from Alcoa. Doubt over the future of the refinery has swirled for some time. Alcoa’s third quarter results last year included $US6m ($9m) for “employee severance costs to be paid through the first quarter of 2024” and flagged about 90 job cuts at the time in an effort to save about $US10m per year. “At Kwinana we’re essentially looking at all options and in the near term we’ve announced a restructuring that takes some cost out,” Mr Oplinger said at the time. “In addition to that we’re looking at a variety of different levers to be pulled to drive cost down and improve profitability there. “But ultimately as with any marginal asset — and Kwinana is a marginal asset at this point — we’ll consider options on the table including curtailment and closure.” Shutting the refinery would deal a major economic blow to Kwinana, the seat of Premier Roger Cook,. Mr Cook last year described Mr Oplinger’s remarks as “disappointing” and said they created “unnecessary uncertainty” for the plant’s workforce. Liberal Leader Libby Mettam called on the Premier to hold “urgent crisis talks” with Alcoa to ensure the refinery remained operational. “This same Labor Government oversaw BP’s closure of its Kwinana refinery after 65 years of operation with a loss of 650 jobs,” she said. “The closure of Alcoa would be a damning indictment on the Cook Government.” Shadow State Development Minister David Honey - a former Alcoa manager - said a combination of red tape and the company’s ongoing struggles to win environmental approval to mine higher-grade ore had driven up costs. “There’s no doubt these two government-driven factors are playing a major role in deciding on the refinery’s future,“ Dr Honey said. “In these circumstances, it is easier for the company to close down the operation rather than keep butting heads with governments seemingly disinterested in helping to keep the jobs going for another 60 years.” The Australian business is partly owned by US giant Alcoa and locally-listed Alumina, with mines in the South West and refineries at Kwinana, Pinjarra and Wagerup which turn ore into alumina. That is shipped overseas and used to manufacture aluminium, a metal used for everything from soft drink cans to fighter jets. Kwinana is the company’s oldest and smallest alumina refinery in the State, commissioned in 1963. The plant produces 2.2 million tonnes a year but has been under pressure as an ageing asset considered the most marginal in Alcoa’s local portfolio. Kwinana was already producing below capacity in 2023. New York Stock Exchange-listed Alcoa warned investors in October that costs were surging as mining operations switched to lower grade ores amid problems securing environmental approval for new supply. The company has had very public troubles with environmental approvals, facing concerns mining plans would endanger Serpentine Dam, a source for almost a fifth of Perth’s drinking water. In December, the Environmental Protection Authority confirmed a full-scale review of Alcoa’s bauxite mining plans through to 2027. But the business was also given an exemption which allowed mining to continue, Alumina Limited told the Australian Securities Exchange. Alcoa of Australia made a profit of $837m in 2022, the most recent numbers filed with with the Australian Securities and Investments Commission show. Dividends to its two parents totalled $1.3b. The price of aluminium had briefly rallied through December, with Bloomberg reporting supply fears driven by an explosion at a plant in Guinea. But the metal has since cooled off to change hands at just less than $2300 a tonne. That’s in the middle of the price range the metal has traded in across the past 25 years, but well down from a peak of about $3500/t in March 2022.