Norsk Hydro began reducing production at the site in March following a series of embargoes from the Brazilian government.
After months of running at half capacity, Norsk Hydro (SWX:NHY,OTCMKTS:NHYDY) will indefinitely curtail production at the alumina refinery Alunorte in Brazil.
Norsk had reduced production at the site since March, following a series of embargoes from the Brazilian government. There was also some concern from environmental authorities over potential overflow in the residue areas.
Alurnote is the largest refinery for alumina, a key component in aluminum production.
The Brazilian embargoes have prevented the industrial metals company from utilizing the newest bauxite residue deposit area (DRS2), as well as the state-of-art press filter technology, representing an investment of more than BRL$1 billion.
The press filter is the most modern and sustainable technology for depositing bauxite residue, reducing the required storage area and environmental footprint.
“Our people have been working hard during the last seven months to maintain safe operations and preserve jobs,” John Thuestad, EVP Bauxite & Alumina, said in the company announcement.
“This is a sad day because we have the world’s most advanced technology available to continue safe operations, which we are prevented to use, and this will impact jobs, communities, suppliers and customers.”
Last year, the Brazilian site produced 6.4 million tonnes of alumina, roughly 10 percent of global production outside China. When production was cut in half in March market prices for alumina and aluminum skyrocketed.
While the prolonged embargoes have been a financial nightmare for Norsk, the removal of half the company’s output since March and now a complete reduction in all output is extremely bad news for the sectors and business that produce or rely on aluminum.
Add to that US tariffs on aluminum and there is potential that there could be a global aluminum shortage. In fact, when news broke of Norsk’s shut down the price of aluminum shot up as much as 3.6 percent to US$2,194 a tonne, touching a three-month high.
At the same time shares in Norsk tumbled on the news that they would not reach output targets.
“We will continue to work constructively with the authorities to lift the embargo and to resume operations in order to re-establish Alunorte as the world’s leading alumina refinery,” said Thuestad.
Norsk shares were down 16.88 percent on Thursday (October 4), trading at US$5.09.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.