A few weeks ago Rio Tinto plc (NYSE: RIO) wrote down $9 billion on the value of its aluminum division, BHP Billiton plc (NYSE: BHP) cancelled its plans to to build a new aluminum smelter in Congo, and Alcoa Inc. (NYSE: AA), Norsk Hydro ASA (OTC: NHYDY), and Rio announced total production cuts of 1.3 million metric tons of aluminum in 2012.
The bad news continues this week as Rio has announced that it will close its aluminum smelter in the UK and lay-off more than 300 of the plant’s 515 employees. Rio, like BHP, is also looking for a buyer for this plant and probably some of its other aluminum operations. Aluminum prices have fallen by almost half since July 2008, to around $2,000/metric ton, and further reductions are likely to be needed to get the markets back in balance.
Selling aluminum assets now virtually guarantees a bargain basement price to any buyer. But buyers are likely to be very scarce. More mining and smelting operations will have to close before the market recovers.
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