Rio Tinto, the third largest aluminium producing company in the world, is mulling the sale of its biggest aluminium smelter in Europe after the prices for the metal surged in the last few months.
LME aluminium has risen by about 30 per cent this year, and this has lent momentum to Rio’s plan of putting up for sale smelters that are “not powered by hydroelectricity.” Europe’s Dunkerque aluminium smelter which currently operates using electricity generated by an EDF nuclear plant is the latest pick for a selling consideration.
{alcircleadd}The plant came on-stream in 1991, and was acquired by Alcan in the year 2003. It has a capacity of 270,000 tonnes of aluminium per year.
The Dunkerque aluminium smelter is not the first property Rio has considered for sale. Last year, the company sold its British operation Lochaber smelter in the Highlands. This year, it has already announced the sale of its coal business in Australia’s New South Wales for US$2.7 billion.
Rio is also seeking buyers for its aluminium smelter in Iceland.
Rio’s Canadian smelters are true cost leaders because of the free hydroelectricity they get to utilise for their operations. The smelters are located in Quebec (ten) and British Columbia (one). All are powered by large-scale hydro-power.
But Canadian aluminium producers have been facing stiff competition from China, where there as many as 180 smelters, mostly supplied with coal power. The country currently produces half of the world’s aluminium, according to the Aluminum Association of Canada. The uncontrolled production by China may any time push global aluminium industry into oversupply and drive prices down. It is therefore important for the Canadian producers to leverage non-carbon spitting production advantages to remain competitive in the long term.
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