Performance
Outlook
On 20 January 2009, Rio Tinto Alcan announced measures to curtail production and cut costs. This involves a reduction in the global workforce of approximately 1,100 roles (300 contractors and 800 employees), and substantial cost reduction programmes in facilities worldwide.
Bauxite & Alumina outlook
The unprecedented, severe decline in global economic conditions and the aluminium metal market towards the end of 2008 are expected to continue throughout 2009 bringing with it reduced global demand for bauxite and alumina.
As a result of the weaker outlook Bauxite and Alumina has implemented alumina production curtailments totalling six per cent and is implementing substantial cost and capital reduction programmes, and project reviews in line with other measures being implemented across the Rio Tinto Alcan product group.
Production at the Jonquière (Vaudreuil) alumina refinery in the Saguenay region of Quebec is to be temporarily curtailed by 400,000 tonnes, while the Gardanne refinery in France will see a 15 per cent cutback of about 105,000 tonnes.
The reduction in alumina refinery production will necessarily result in reduced global demand for bauxite. Rio Tinto's major bauxite resources in Weipa and Guinea are at the low end of the cost curve and well positioned to supply internal demand and third party demand when the outlook improves.
These measures are being taken to reduce levels of debt, conserve cash flow and better align production with demand to ensure the division is well positioned to take advantage of improved conditions when the global economy recovers.
Primary Metal outlook
Demand and pricing for Rio Tinto Alcan's products were adversely affected by the deterioration of the global economic situation towards the end of 2008. Rio Tinto Alcan expects this very difficult market environment to prevail during 2009 and to continue to impact its operations.
Rio Tinto Alcan has initiated a variety of targeted measures to conserve cash. These actions include production curtailments, significant reductions in capital expenditures and additional cost, procurement and working capital initiatives. In 2009 there will be an 11 per cent reduction in aluminium production brought about by permanent closure of the Beauharnois smelter in Quebec, Canada, and production curtailments that started in 2008 at the Dunkerque (France), Lochaber (UK), Lynemouth (UK), and St-Jean-de-Maurienne (France) smelters and at the SORAL (Norway) joint venture.
In addition, reduced capacity will result from equipment failure at Tiwai Point (New Zealand); reduced production due to energy supply issues at Alucam (Cameroon); the sale of Rio Tinto Alcan's 50 per cent interest in an aluminium smelter in the Ningxia province of China; and due to unsuccessful power negotiations, the anticipated ending of smelting operations at Anglesey Aluminium Metal in the UK at the end of September 2009 when its current power contract expires.
Rio Tinto Alcan believes that its position on the industry cost curve, its pipeline of long term value creation options as well as these short term cash preserving measures will assist the group in the current economic situation.
