Norsk Hydro: Alunorte announces full curtailment of its operations

Hydro’s alumina refinery Alunorte in Brazil announced today, October 3, that the plant is preparing for full curtailment of its operation. The decision was taken as the bauxite residue deposit area 1 (DRS1) is close to reaching its capacity, due to the embargo on the state-of-the-art press filter and the newly developed bauxite residue deposit area (DRS2).

October 3, 2018
Alunorte (Photo: Hydro/Jo Michael)

Alunorte has been running at 50% production since March, following embargos from Brazilian authorities. Environmental authorities have confirmed that there was no spill or overflow from the residue areas. The embargos have prevented Alunorte from utilizing the newest bauxite residue deposit area (DRS2), which was under commissioning in February, as well as the state-of-art press filter technology, representing an investment of more than BRL 1 billion. The press filter is the most modern and sustainable technology for depositing bauxite residue, reducing the required storage area and environmental footprint. Alunorte has since the embargo made efforts towards authorities for permission to utilize the press filter, as well as DRS2, without success.  

Due to the embargo Alunorte has been forced to operate only DRS1, which was originally planned to be phased out, and the less efficient drum filters. DRS1 is therefore approaching its end of life faster than anticipated, forcing Alunorte to take the responsible decision to temporarily shut down 100% of its operations. This will have immediate effect on the bauxite mine Paragominas, which will also shut down 100% of operations. Both Alunorte and Paragominas have initiated the shutdown process safely. 

“Our people have been working hard during the last seven months to maintain safe operations and preserve jobs. This is a sad day because we have the world’s most advanced technology available to continue safe operations, which we are prevented to use, and this will impact jobs, communities, suppliers and customers”, says John Thuestad, EVP Bauxite & Alumina.

Hydro is working in collaboration with unions and will do its utmost to reduce the consequences for employees, but the decision to close Alunorte and Paragominas will impact direct and indirect employees at both plants. 

While it is too early to determine the full impact, the decision to close Alunorte and Paragominas will have significant operational and financial consequences, potentially also for Hydro’s primary aluminium portfolio, including Albras. 

“We will continue to work constructively with the authorities to lift the embargo and to resume operations in order to re-establish Alunorte as the world’s leading alumina refinery”, says Thuestad. 

Background 

On February 16–17, the city of Barcarena, including Alunorte alumina refinery, was hit by an extreme rainfall, which continued in the following days. The rainfall caused flooding in the region.  

Internal and external reviews confirm that there was no overflow from the bauxite residue deposits or harmful spills from the February rain event.  

Since March 1, Alunorte has been operating at 50% of its capacity, following orders from SEMAS and the court system. Consequently, Paragominas bauxite mine and Albras aluminium plant have also reduced production by 50%.  

Both Alunorte and Paragominas have granted collective vacations to around 1,000 employees to preserve jobs and mitigate the impacts of the reduced activity. In July, Paragominas temporarily suspended work contracts for 80 employees and terminated 175 contractors. 

On September 5, Alunorte signed two agreements representing a milestone to resume normal operations. The agreements include a technical Term of Adjusted Conduct (TAC) signed between Alunorte – Alumina do Norte do Brasil S.A, Norsk Hydro do Brasil Ltda, the Ministério Público Federal (MPF), the Pará State Ministério Público (MPPA), the State Government of Pará, represented by the Secretariat of State of Environment and Sustainability (SEMAS). In addition, a social Term of Commitment (TC) was signed between Alunorte - Alumina do Norte do Brasil S.A and the State Government of Pará. The TAC regulates certain technical improvements, audits, studies and payments for food cards to families living in the hydrographic area of the Murucupi River, while the TC addresses additional efforts and investments related to the social development of communities in Barcarena.

Cautionary note

Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments 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, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar. 

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 businesses; 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.

 


Updated: October 3, 2018