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    Norwegian smelter forced to slash aluminium output

Summary

But Alcoa believes its energy bill will be significantly reduced in Q4, thanks to its power supply deal with Norwegian utility Statkraft.

by: Callum Cyrus

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Complimentary, Natural Gas & LNG News, Europe, Security of Supply, Market News, News By Country, Norway

Norwegian smelter forced to slash aluminium output

New York-listed aluminium production company Alcoa said August 30 that its Lista smelter in Norway had been forced to cut output by one third due to soaring energy costs.

Alcoa's Lista production smelter typically operates three potlines with an annual 94,000 metric ton capacity. A 31,000 metric ton/yr potline has been closed and will not reopen for at least 14 days.

The closure was blamed on energy prices rising above  $600/MWh. Aluminium smelters typically use an electrolytic process to melt raw metals, drawing on electricity production exposed to the recent surge in European wholesale gas prices.

Benchmark spot prices for gas eased on August 30 in Dutch and UK trading hubs, according to Reuters. The Dutch TTF contract for September was down by €12 at €255/MWh, while prices for Q1 2023 deliveries fell €82.5 to €263/MWh.

Alcoa expects energy prices at the Lista smelter to ease in coming months. It signed a long-term power supply agreement with Norwegian power utility Statkraft in 2019, agreeing to buy just over 440 GWh/yr through until 2026. Around 65% of energy contracts for Alcoa's global smelting portfolio are indexed to LME aluminium benchmarks, but the Lista smelter is largely exposed to spot prices.

"In the fourth quarter of 2022, the energy situation for the site is expected to improve due to a favourable agreement with power utility Statkraft that will provide more predictable energy costs throughout the remainder of the year and into 2023," the company said.