SHANGHAI, Jan 10 (SMM) - Alcoa said on January 9, 2023 that the enterprise expects the alumina production at its Kwinana alumina refinery in Western Australia to be cut by about 30% due to a shortage of natural gas supply. A unit of the refinery has been taken offline and process flows will be reduced, the aluminium producer said in statement. Alcoa owns 60% shares of refinery and Alumina Ltd owns the rest 40%. Alcoa has not yet given a specific date for production resumption. In addition, the Australian government previously announced a 12-month price cap on natural gas and coal prices in December 2022 to curb the spike in energy prices, but gas producers said this could actually put supply at risk.
Reasons for the lack of natural gas in Australia
Gas supplies to Western Australia were cut off on January 5, when Chevron Corp's Wheatstone gas plant in Australia, which produces 215 terajoules per day, was shut down due to an equipment failure. A Chevron Corp spokesman said on Jan. 9 that production at the Wheatstone plant was expected to resume "in the coming days" and the company was working with customers, the regulator and the broader market to meet demand. According to SMM survey, the Wheatstone outage came on top of a loss of supply from Santos Ltd's Varanus Island operation, which has been shut since late November due to a leak on a gas pipeline from an offshore platform.
Specific impact of production cuts at Kwinana alumina refinery
According to SMM survey, Kwinana refinery produced 2.22 million mt of alumina in 2021 and 1.99 million mt in 2022. SMM predicts that this round of production reduction will persist for one and a half months. Given that the installed alumina capacity of the plant is 2.19 million mt, then a 30% reduction in production will amount to 657,000 mt loss in total or 1,800 mt/day. In this case, about 81,000 mt of alumina output will be affected during the closure. Kwinana is the oldest alumina refinery in Australia, whose alumina products are exported to the Middle East, India, China and South-east Asia as well as a small amount to Africa, Europe and North America. Before the production cuts of the plant occurred, the overseas market was calm, with alumina price in Australia staying at $330/mt for several consecutive weeks. If Kwinana plant fails to resume the production soon enough in the short term, overseas alumina prices will be bolstered. Moreover, if the production cuts expand or extend, it is undoubtedly that the alumina prices overseas will enjoy upward momentum.
