Alcoa on Friday said it expects to keep its Point Henry aluminium smelter in Australia operating until at least mid-2014 but warned losses at the 190,000-tonnes-per-year plant were mounting as market conditions deteriorate.
The news coincides with the granting of a government assistance package totalling more than A$40 million aimed at preserving most of the 600 jobs at the smelter as Alcoa grapples with a severe downturn in market conditions and reviews its aluminium-making operations worldwide.
"The way things are right now, two years is a long time in our industry," Alcoa of Australia Managing Director Alan Cransberg said in a statement.
"No one can predict exactly what's going to happen with the global economy or where exchange rates and the price of aluminium will move," he said.
When the review was announced, the smelter was facing substantial losses, Cransberg said.
"Since then global market conditions, such as exchange rates and the aluminium price, have made the situation worse," he said.
Norsk Hydro last month said it was shutting its 180,000-tonnes-per-year Australian aluminium smelter, also citing low metals prices and a dismal economic outlook.
The country's smelters have been hammered by high costs that make it difficult to compete with Chinese producers, as well as falling metals prices.
With the overhang of high inventories and a 20 percent drop in prices since March, aluminium producers are losing money. Benchmark three-month London Metal Exchange aluminium stood at $1,855 a tonne on Friday.
Production cuts aimed at attacking a global supply glut total around 1 million tonnes worldwide so far this year.
Alcoa has ruled out Australia's looming carbon tax on emissions playing a major role in adding to future losses at the smelter.
The tax takes effect on July 1. Under the plan, the carbon price will be set at A$23/tonne for three years, before moving to a full trading scheme with a floating price from July, 2015.
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