Alcoa Corporation AA plans to fully curtail production in 2024 at its Kwinana Alumina Refinery in Western Australia, with the process beginning in the second quarter.
The Kwinana refinery has an annual nameplate production capacity of 2.2 million metric tons. The refinery has been operating at approximately 80% of its nameplate capacity since January 2023.
Matt Reed, Alcoa's Executive Vice President and Chief Operations Officer, said the determination to curtail the 60-year-old facility is based on various factors, including its age, scale, operating costs, and current bauxite grades, in addition to current market conditions.
The curtailment will include a phased reduction of the workforce from around 800 employees at the start of 2024 to approximately 250 in Q3 of this year, when all alumina production will cease.
Certain processes, however, will continue until about Q3 of 2025, when employee numbers will be further reduced to approximately 50.
The refinery and associated residue storage facilities will continue to be actively managed.
Alcoa's port facilities located alongside the refinery will continue to operate to import raw materials and export alumina produced at the Company's Pinjarra Alumina Refinery.
Production at the Pinjarra and Wagerup refineries is not expected to be impacted by the curtailment at Kwinana.
The Kwinana refinery recorded a net loss of approximately $130 million in 2023.
Due to the curtailment, the company expects annual improvements of approximately $70 million beginning in the third quarter of 2024. While curtailed, the refinery will continue to incur roughly $40 million of non-cash depreciation, depletion, and amortization expenses.
In the first quarter of 2024, Alcoa will record restructuring charges between $180 million and $200 million related to refinery curtailment.
Alcoa's share (after-tax and noncontrolling interest) will be between $76 million and $84 million, or $0.42 to $0.47 per share.
Alcoa's share of related cash outlays is approximately $115 million, of which $80 million is expected to be spent in 2024 and the remaining $35 million in 2025.
Price Action: AA shares are down 1.04% at $31.40 premarket on the last check Tuesday.
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