Musings, politics and environmental issues

On 13 February, I wrote a blog about Iceland’s oldest aluminium smelter, Straumsvik, being under threat of closure. The price of aluminium was very low and the owner, Rio Tinto, said that the Iceland smelter had “uneconomic energy costs”. The smelter was constantly making a loss and production was going to be cut by 15% this year.

Since then, COVID-19 has become a pandemic with countless repercussions for society and industry. Aluminium supply has exceeded demand for some time and industry-wide demand is expected to fall by 8% this year. Car manufacturers, which usually are big buyers, are having to deal with workers in quarantine, curfews and reduced demand for new cars, and companies such as Ford, Peugeot and Volkswagen have already reduced their output.

Aluminium production currently stands at being in excess of 6 million tonnes per year, but if uneconomic aluminium smelters are closed the excess will be reduced to around 4 million tonnes.

According to a report in the Icelandic media (in Icelandic), closing a smelter is an expensive undertaking and the smelter is still tied to its energy contract. One of its (unnamed) interviewees says that the smelter was running at such a loss that it would almost be more economical to pay the electricity cost and close the plant, and that the chances of the Straumsvik plant being closed have increased.

Norwegian company Hydro also say they are considering closing one of their 6 smelters in Norway. The smelter at Årdal mainly makes aluminium for the car industry.




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