ALRO announces that due to the high costs and scarce availability of energy products, it has to change its strategy of being vertically integrated and adapt to the new and challenging context by temporarily shutting down its alumina production facility based in Tulcea, Romania.
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“The economic crisis generated by the pandemic has been escalated by the energy crisis from 2021 as a result of the accelerated increase of the electricity and natural gas prices with a negative impact on the production costs for calcined alumina and electrolytic aluminium. The natural gas cost per one tonne of alumina is significantly higher than the actual price of one tonne of alumina imported and delivered to ALROâ€, said Gheorghe Dobra, CEO of ALRO and Chairman of the Board of Directors of ALUM.
“Specifically, the alumina produced by ALUM, would reach a cost of more than 900 USD/tonne, while the price of alumina on the international markets is around 500 USD/tonne. The weight of energy products only in the total cost of alumina is notably high, reaching approximately 500 USD/tonne in 2022â€, added Dobra.
The gas price increased ten times from 18 EUR/MWh in Q1 2021 to over 180 EUR/MWh in Q4 2022. The electricity price followed the same trend and from 60 EUR/MWh in Q1 2021 it reached and exceeded 500 EUR/MWh in Q4 2022. Currently, there is a shortage of electricity and natural gas for consumers on the market.
The price of the CO2 emission certificates has increased from approx. 25 EUR/certificate at the end of 2020 up to over 90 EUR/certificate currently.
ALRO and ALUM have developed scenarios for operating at a minimum break-even point or at by reducing the financial losses by suspending certain production activities and switching some production equipment to stand-by.
ALRO has reduced the primary aluminium production by 60% by shutting down three electrolysis potrooms and, ALUM has revised its manufacturing schedule according to the level of calcined alumina required for ALRO but with the continuous increases in prices, the cost of alumina has reached an unsustainable level.
In this context, the Management proposed for the approval of the General Meeting of Shareholders, which will take place on 29 July 2022, the temporary suspension of ALUM’s alumina production operations, starting with 1st of August 2022 for an estimated period of 17 months, while keeping the key specialists from all plant departments that will prepare for the resumption of production when the evolution of energy product prices will allow it.
Around 500 employees are to be laid off at the Tulcea plant in the current context, while the plant will keep a key group of specialists to perform R&D, alumina supply logistics, maintenance, and repair works and to be ready for a quick restart and ramp up of the production when the energy market conditions will improve. ■