Slovalco will stop primary aluminium production

Hydro’s majority owned Slovalco aluminium facility in Slovakia has decided to close the primary aluminium production at the plant. The closure will be completed by the end of September 2022.

The decision to terminate primary aluminium production at Slovalco comes in response to adverse framework conditions and high electricity prices, which show no signs of improvement in the short term. The casthouse in Slovalco will continue its recycling operation, serving customers in the region with 75,000 tonnes of recycled aluminium annually.

“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,” says Ola Sæter, head of Hydro’s primary production and chair of Slovalco’s Board of Directors.

“Slovakia has not implemented the 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,” says Sæter.

Slovalco curtailed 40% of its 175,000 tonnes per year primary capacity in late 2021 and early 2022, and is currently running at 60% of its capacity. The primary production lines at Slovalco will be mothballed and may resume operations at a later stage if the market and framework conditions allow. The closure process will commence shortly and be completed no later than the end of September 2022.

Correspondingly, Slovalco has decided to unwind remaining hedge positions for power, metal and raw materials. This will result in a total positive effect on adjusted EBITDA of around NOK 1.6 billion (100%) in the second half of 2022. The total cost of the production termination is limited.

The decision to close primary production will affect 300 of Slovalco’s full time employees, in addition to a reduced need for services from contractors and suppliers in the region. A process has started to assist affected employees.

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