Big European Aluminium Rolling Companies Are Considering Cutting Production At Their German Aluminium Smelters By 50 Per Cent

Speira, a large European aluminium rolling company, is considering cutting output at its German aluminium smelters to 50 per cent of total capacity in response to soaring energy costs. Speira, for its part, said it would make a decision on whether to cut production in September.

Speira was the aluminum rolling division of Norsk Hydro ASA, one of the world's largest aluminum producers, before it was sold to KPS Capital Partners and became a separate company last year, according to the filing. Speira's plant in Noyes, Germany, can produce about 160,000 tons of aluminum, but currently produces only about 140,000 tons.

Soaring energy costs are squeezing power-intensive industries across Europe, and the Speira cuts will add to the extreme impact of the energy crisis on the continent's metals sector. The European metals industry is one of the largest industrial consumers of electricity and gas, and aluminium and zinc capacity in the region has fallen by about 50 per cent in the past year. Just last week, Nyrstar and Norsk Hydro, two of the world's largest zinc smelters, announced plans to close a zinc smelter and an aluminium smelter, respectively.

Aluminum is one of the most energy-intensive metals in production. Long-term power supply agreements and energy hedges provide only partial protection against the surge in electricity prices over the past year. Some smelters have already started to shut down altogether, a move that could affect regional supplies in the long term and make consumers more dependent on imports.

Speira's plants are also significant consumers of natural gas, converting commodity-grade aluminum into specialized products used in car manufacturing, packaging and other industries but facing sharply higher costs from a gas security tax being implemented in Germany.

While an initial round of production cuts sent prices soaring earlier this year, fears of a potential sharp drop in demand have been weighing on aluminium prices, with weaker prices putting further pressure on smelters and leaving them potentially exposed to heavy losses from high energy prices.