The strong Australian currency is taking its toll on the country's aluminium smelter sector with another plant facing the threat of closure due to high production cost and weak global prices. Mining giant Rio Tinto (ASX: RIO) warned it may shutter its Bell Bay smelter which may cause the loss of 600 jobs.

In February, Alcoa placed its aluminium smelter plant operations in Geelong under a six-month review process due to similar reasons cited by Bell Bay. About 600 smelter jobs in Alcoa are also under threat, which would bring to 1,200 the total number of smelter jobs recently at the risk of being axed.

Rey Mostogl, general manager of Rio's Bell Bay Aluminium smelter, said the company is considering the closure of some potlines if the business conditions would continue to be challenging. However, he declined to confirm a report that the facility's 600 employees had been told of the likely chances of a plant closure in two years.

Bell Bay estimated that it is losing $200,000 per day in is aluminium plant in Tasmania. This development is expected to affect the plans of the Australian Workers Union to push for a collective agreement that targets to place Bell Bay workers' entitlement at par with their counterparts in other aluminium smelters. However, Rio reportedly is against the equalisation plan and claims it pays competitive rates.

Mr Mostogl said Bell Bay is not leaving any stones unturned in its attempt to make the company resilient in any market conditions. To help further cut cost at its Bell Bay operations, Rio is negotiating a new power supply agreement with Hydro Tasmania.

Last week, another mining giant, BHP Billiton (ASX: BHP) said it would suspend production and hold a review of operations at its Temco manganese alloy smelter, near the Bell Bay plant. Norsk Hydro, another aluminium producer, recently cut a third of its 180,000 tonnes annual output at its Kurri Kurri aluminium facility and also warned of more cuts.

The closure of aluminiun plants across Australia is expected to worsen the country's unemployment rate which slightly improved to 5.1 per cent in January 2012 from 5.2 per cent in December 2011. However, the joblessness rate is expected to climb up again following the loss of hundreds of jobs in the banking, construction and manufacturing sectors and amid the threat of the loss of 10,000 jobs at Reed Construction in New South Wales over cashflow problems.

RELATED STORIES