Alcoa reverts to gas to fuel Western Australia's alumina refineries as supply partially resumes

Alcoa has reverted to using gas to fuel the powerhouse boilers at the Kwinana and Pinjarra alumina refineries in Western Australia following an increase in gas supply to the domestic gas market, according to a statement released by Alcoa Jan. 12.

Alcoa said it had switched to using diesel on Jan. 6 as a temporary fuel source for operational needs "as an immediate response to the domestic gas issue prompted by production challenges being experienced by key gas suppliers".

S&P Global reported on Jan. 9 that Alcoa's Kwinana Alumina Refinery in Western Australia had cut production by about 30% due to a gas shortage in the state, operating with one production unit offline and reduced process flows.

The curtailment in output remains in place despite the increase in domestic gas supply as "Santos continues to experience production constraints at two gas facilities, resulting in ongoing uncertainty in the gas market."

Among the gas plants in Western Australia that are facing disruptions are Chevron's Wheatstone plant, as well as Santos' John Brookes facility at Varanus Island and Devil Creek facility. The Wheatstone plant, which was shut Jan. 5 due to an equipment failure, restarted gas supply to Western Australia's domestic market on Jan. 11.

On Jan. 9, following news of the curtailed output, a source from Alcoa's global alumina sales and marketing team said: "As it stands, force majeure is not off the table."

"[The gas plant that broke down] is supposed to be slowly limping its way back to resuming operations within the week, but we really can't say for sure at this point of time, and the subsequent restart of the refinery is contingent on gas security as well," another Alcoa source from the same team said Jan. 11.

As of midday in Singapore Jan. 12, S&P Global has yet to receive any indication from market participants of confirmed delays to upcoming shipments from Alcoa, but sources are continuing to keep a close eye on potential disruptions to deliveries.

Sources at Alcoa said the company was continuing to assess the situation at the Kwinana plant and are "communicating with customers, working with operations to give more clarity on what the schedule looks like" for alumina output and shipments.

When S&P Global enquired as to how long it will take the curtailed refinery capacity to recommence after the gas plant restarts, sources at Alcoa said it would be approximately 10-14 days "in an ideal situation". However, they added that developments remained a "moving target" given the uncertain situation at other affected gas facilities in Western Australia.

The Kwinana refinery is a major alumina refinery in Asia-Pacific, and prices a sizeable portion of its alumina sales basis Platts Alumina Index (PAX) FOB Australia benchmark.

Platts assessed benchmark Australian alumina up $15/mt on the week at $345/mt FOB Jan. 11, S&P Global data showed, on the back of increasing price indications as well as ongoing market developments in Australia.

The plant in Western Australia has a nameplate capacity of 2.2 million mt/year, of which 85% of the output is smelter-grade alumina, while the remaining production is non-metallurgical alumina.

It is owned and operated by Alcoa World Alumina and Chemicals, a joint venture between Pittsburgh-based Alcoa, which manages day-to-day global operations, as well as leading metals and mining Australian investor Alumina Limited (40% share). Alcoa has a 60% interest in the JV, while Alumina Limited a 40% share.