Rio Tinto declares force majeure on aluminum orders

Rio Tinto Alcan said on Wednesday that it has declared force majeure on aluminum output from two of its smelters in Canada due to separate operational and labour issues that have curtailed production at the sites.

The company, a unit of Anglo-Australian mining giant Rio Tinto Group, started slashing production at its Alma smelter in Quebec on Jan. 1, when it locked out more than 750 unionized workers after contract talks broke down.

spokesman also confirmed that the company has been forced to reduce output from its Shawinigan, Que., smelter due to a circuitry failure. The facility, which can produce 100,000 tonnes of aluminum a year, is now operating at 50 per cent capacity after two of its four smelting cells were halted.

The company, which has already decided to permanently end operations at Shawinigan by December, 2014, has yet to decide on whether it will bring the two idled smelting cells back into production before operations at the facility wind down.

The price of aluminum, used in a wide range of applications from packaging, to cars, airplanes, and electronics, has fallen recently as the euro zone crisis and other economic woes have triggered concerns about global growth and demand for industrial metals.

The London Metal Exchange three-month aluminum price was last indicated at $2,065.10 a tonne, down roughly 16 per cent from a year ago.

Alma, which is Rio Tinto’s largest wholly owned aluminum smelter, will for now operate at one-third of its 438,000-tonne-a-year capacity, the company said.

The company said on Wednesday that the production cuts had forced it to declare force majeure earlier this week to certain clients that rely on output from the two facilities.

Force majeure is a clause included in contracts that removes liability for natural and unavoidable events that restrict companies from fulfilling their obligations.

Customers that source product from Alma have been told that the labour situation may result in delayed orders and/or extended delivery dates.

Customers of Shawinigan’s output have been informed that Rio may be able to minimize the disruption of orders, if it is able to maintain current production levels from its operational smelting cells at the facility.