Shutting the 50-year-old Point Henry smelter, in Geelong, 74 kilometers (46 miles) southwest ofMelbourne, will cut Alcoa’s global smelting capacity by 190,000 metric tons to 3.7 million tons, the New York-based company said yesterday in a statement. Combined with the closure of rolling mills in Victoria and New South Wales, it will result in the loss of about 1,000 jobs.

The smelter is “a small operation which doesn’t use modern technology and can’t be upgraded,” Matthew Hope, a Sydney-based analyst at Credit Suisse Group AG, said by phone. “You’d have to rebuild the entire smelter and they don’t want to do that, particularly in Australia.”

Alcoa is building the world’s lowest-cost smelter in Saudi Arabia in a joint venture with Saudi Arabian Mining Co., or Maaden, while it has since May curtailed or permanently closed 551,000 metric tons of capacity at high cost assets in the U.S. and Europe. Alcoa will seek a buyer for the Anglesea coal mine and power station that supplies about 40 percent of the smelter’s power, the company said.

Not Sustainable

“These assets are no longer competitive and are not financially sustainable today or into the future,” Chief Executive Officer Klaus Kleinfeld said in the statement on the closures. The smelter was placed under review in February 2012 because of challenging market conditions, Alcoa said

Alumina Ltd. (AWC), which has a 40 percent stake in Point Henry, fell 2.3 percent to A$1.30 at 11:20 a.m. in Sydney trading.

The closures come after Toyota Motor Corp. this month signaled the end of the nation’s carmaking industry, saying it will shut its production lines in three years time. The Geelong smelter employs about 500 people and will close in August, while an adjacent rolling mill and a second mill and recycling facility in Yennora, New South Wales state, which employs about 480 people, will close by the end of the year, Alcoa said.

Restructuring charges related to the smelter and mills closures in 2014 are expected to be between $250 million and $270 million, Alcoa said in its statement. “The two rolling mills serve the domestic and Asian can sheet markets which have been impacted by excess capacity,” it said.

The Portland Aluminum smelter in Victoria will continue normal operations, as will Alcoa of Australia Ltd.’s bauxite mining and alumina refining operations in Western Australia.

To contact the reporters on this story: David Stringer in Melbourne at dstringer3@bloomberg.net; Sonja Elmquist in New York atselmquist1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers atjrogers73@bloomberg.net

http://www.bloomberg.com/news/2014-02-17/alcoa-to-close-australian-smelter-mills-on-excess-capacity.html

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