Global miner Rio Tinto , one of the world's top producers of aluminium, is set to close its Lynemouth smelter in northeast England as rising energy costs put pressure on aluminium margins, though it could sell the power station at the site.
Rio -- which like other aluminium producers has found its margins squeezed by rising input costs and falling prices -- last month signalled a major retreat from its aluminium business putting $8 billion worth of assets up for sale.
The decision to shutter the Lynemouth smelter, which employs 515 people, follows a strategic review of options for the site.
"It is clear the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation. We are hopeful that the power station can remain in operation under new ownership," Jacynthe C?té, chief executive of Rio Tinto Alcan, said.
Rio said it was in exclusive talks regarding the sale of the power station, but gave no details. A spokesman for the company said in August that the coal-fired power station would have to switch to biomass generation if it was to have a long-term future.
Aluminium prices have dropped more than 20 percent from a 2011 peak in May.
The Lynemouth smelter had been in the process of returning to full capacity of around 175,000 tonnes a year. Production was curtailed around late 2008/early 2009 in response to a slump in global demand and prices.
Most of its output is exported to mainland Europe, primarily to Germany, ending up in a variety of uses including the packaging, construction and automotive industries.
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