Band Pratima Desai
LONDON, August 17 (Reuters) – Norsk Hydro will close its majority-owned primary aluminum plant in Slovakia by the end of September due to high electricity prices that show no signs of falling in the near term, the company said in a statement on Wednesday.
European smelters are estimated to have cut 800,000 to 900,000 annualized tonnes of aluminum production since energy prices started to rise last year.
Analysts say an additional 750,000 tonnes of production could be cut this winter, which would mean bigger deficits and higher prices for European consumers in the transport, packaging and construction sectors.
Slovalco power plant, 55.3% owned by Norsk Hydro NHY.OL and 44.7% by Penta Investments Group, with a production capacity of 175,000 tons per year of aluminum, operating at only 60% of its capacity of 105,000 tons.
The Slovak government could have provided financial assistance through the European carbon offset program, but it did not, Norsk Hydro said.
The European Union-endorsed CO2 offset scheme allows national governments to provide compensation to energy-intensive industries such as aluminum smelting to help them recoup some of the costs associated with high carbon prices. ‘they have to pay because of the Emissions Trading System (ETS).
“Slovakia has not put in place a competitive European CO2 compensation framework. This has prevented Slovalco from entering into long-term electricity contracts and the current power plant contract expires at the end of 2022,” said Ola Sæter. , Chairman of the Board of Slovalco.
In countries like Germany, the CO2 offset for a smelter producing 200,000 tons per year will be around 67.55 million euros ($72.54 million) this year, according to calculations by Norsk Hydro.
Hydro said the decision to shut down primary production will affect 300 of Slovalco’s full-time employees.
The Slovalco smelter will continue its recycling operation, serving customers in the region with 75,000 tons of recycled aluminum per year.
Consumers buying aluminum on the physical spot market pay the LME Aluminum Reference Price CMAL3which reached a record above $4,000 per ton in March, plus a physical market premium paid, which in May reached a record of $615 per ton in Europe.
(Reporting by Pratima Desai; Editing by Leslie Adler)
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