"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.