Hydro to shut down primary aluminium production in Slovakia, recycling operations to continue

Slovalco Aluminium, Slovakia’s only aluminium producer, is about to terminate its primary aluminium production line by the end of September 2022. Hydro owns majority stakes at the aluminium plant and has declared that the regular recycling operations will continue.

The head of Hydro’s primary production and chair of Slovalco’s Board of Directors, Ola Sæter, exclaimed: “Slovalco is a well-run and modern primary aluminium plant, well placed to serve European customers with high-quality aluminium products. I regret that it has not been possible to secure continued operation of the primary production at the plant.”

“Slovakia has not implemented a competitive EU CO2 compensation framework. This has prevented Slovalco from entering long-term power contracts, and the plant’s current contract expires at the end of 2022. Due to the current Slovak framework conditions and the European power prices, Slovalco would incur substantial financial losses if it continued its operation beyond 2022,” Sæter confirmed his theory with adequate data.

This administrative decision was taken due to heightened energy prices and a haphazard working condition of the plant, which portrayed no signs of retribution in the upcoming few years. The Slovalco cast house will keep churning its recycling wing to provide customers in the territory with 75,000 tonnes of secondary recycled aluminium each year.

By late 2021 and in the early months of 2022, Slovalco had already decreased its production rate by 40 per cent from its actual yearly capacity of 175,000 tonnes of primary aluminium. For a long time, the smelter has been producing only 60 per cent of its achievable capacity. Nevertheless, it is understandable that such a colossal enterprise cannot be run to yield such a small amount of material; therefore, the officials of Slovalco have taken a wise decision by stopping the primary aluminium production at this moment with open opportunities for future restoration if the market condition turns favourable. The closure process is scheduled to commence shortly, with final implementation carried on strictly by the end of September 2022.

Additionally, Slovalco has made up its mind to unwind the residual hedge positions to acquire metal, power and raw materials. This will have a constructive effect on the negotiated EBITDA of almost NOK 1.6 billion or 100 per cent in the second half of 2022. The entire cost of the production halt is measurable and restricted.

Closing the primary aluminium production line will directly affect the work-life of 300 full-time Slovalco employees and hamper the construction and supplier relations in the area. Already the board has begun programs to aid the employees in getting back on their feet. 

As early as July 2022, we witnessed incoming reports of the plant’s closure, but it has been officially notified for the first time now. Slovalco is a fully integrated aluminium smelter partly owned by Hydro (55.3 per cent) and the Penta Investments Group (44.7 per cent). Slovalco used to flaunt a production rate of 175,000 tonnes of primary aluminium each year and a casthouse volume of around 250,000 tonnes of aluminium products.