We understand that RTA and Pacific Aluminium have announced a 10-day delay on a decision on the future of the Gove alumina refinery.
This is a difficult decision in either direction, for all players. RTA and PacAl have a loss-making asset on their hands, and although international alumina prices are a touch higher recently, domestic alumina prices in China are preventing any sort of sustained rally. On the Government’s side of the table, they are facing a substantial loss of employment in a remote area, as well as the loss of taxes and spin-off jobs and industry.
The Government had asked RTA and PacAl to delay their decision, saying that it would take months to put together a deal that would save the refinery – a natural gas pipeline. We first discussed this here.
Now RTA and PacAl have delayed the announcement of their decision by 10 days. To my way of thinking, this is the worst possible news for the employees at Gove, as well as those on the Government side of the negotiating table.
Ten days is not much more than a token. Combine that with the aggressive position that they are taking on bauxite sales and pricing, and it all points to an announcement that the plant will close. To market participants, it appears that RTA/PacAl is looking to create a market price for bauxite. Once Gove’s supply of bauxite comes into the market, they will be already prepared for the price shock. You can’t bring an additional 8 million tonnes of bauxite into the market without sustaining some sort of price reduction, but if you have pushed the price up before the public announcement, you might have more of a cushion.
A decision to close Gove would also be in keeping with our view that new RT boss Sam Walsh will look to complete what Tom Albanese started, with divestment of high cost assets. But with virtually no other employment opportunities in that far-flung corner of Australia, it will be devastating for the local community. If we are right, then a team of public relations and other specialists is probably already being assembled – with a mandate to be ready for action within 10 days.
If Gove is closed, it will send shivers down the spines of the rest of the Australian aluminium community.