Rio cuts alumina output in Australia

Core Viewpoint - Rio Tinto plans to reduce output at its Yarwun alumina refinery by 40% starting October 2026 to extend the plant's operational life to 2035, amounting to a reduction of approximately 1.2 million tonnes of alumina annually, while ensuring customer supply commitments remain unaffected [1][2]. Company Summary - The decision to cut production is described as difficult but necessary, aimed at preserving future options for the site and maintaining its economic contribution, with substantial investment required for the refinery [2]. - High costs related to power, labor, and capital are challenging alumina processing in Australia, compounded by increasing low-cost supply from Indonesia and China, which is pressuring margins [2]. - The current alumina prices are significantly lower than the peak of $800 per tonne experienced last year, with Rio's production cut representing only 1% of the global alumina market, which is approximately 140 million tonnes [2]. Industry Summary - Alumina prices have been under consistent downward pressure due to increased domestic capacity in China and other parts of Asia, with the CRU's Atlantic Basis Price index recently assessed at $340 per tonne, nearing its low of $334 per tonne [3]. - The reduction in output at the Yarwun refinery is driven by tailings-storage constraints, with the existing plant expected to reach capacity by 2031 at current production rates [4]. - The cost of constructing a second tailings area is deemed unviable in the current market conditions [4]. Operational Impact - The output reduction will provide Rio Tinto with an additional four years to explore alternative technical solutions for the refinery, as previous studies on site engineering improvements have been financially daunting [5]. - The reduction will not affect the company's bauxite mines or aluminum smelters, which will continue to operate at full capacity, although approximately 180 of the refinery's 725 jobs are expected to be impacted [6]. - The company plans to utilize the time from the output reduction to test various tailings-management options to extend the life of the existing storage footprint [6][7].