BHP Aluminum Smelter in South Africa May Be Unviable

April 24 (Bloomberg) -- BHP Billiton Ltd., Africa’s biggest aluminum producer, said its Bayside smelter in South Africa may become unviable financially because of weaker domestic demand. “The financial viability of the smelter is at risk,” Bronwyn Wilkinson, a spokeswoman for the Melbourne-based company, said in an e-mailed response today to questions from Bloomberg News. “BHP Billiton is exploring various options relating to the restructuring of the Bayside smelter to ensure the long-term sustainability of the operation.” The smelter, which has been operating at half of its capacity of about 174,000 metric tons a year, makes “value- added” aluminum products such as billets and rods. South African manufacturing fell at an annual rate of 15 percent in February, the most since at least 1991. Hulamin Ltd., Africa’s largest aluminum processor and a BHP customer, said yesterday it was in talks with BHP that may affect its share price. Hulamin spokesman Frederic Cornet didn’t immediately respond to e-mailed queries today. Hulamin said yesterday first-quarter sales slid 40 percent on lower demand from the automotive and engineering industries. First-half net income probably will fall as much as 92 percent, the Pietermaritzburg, South Africa-based company said. BHP rose 50 pence, or 3.6 percent, to 1,435 pence in London trading. Hulamin fell 66 cents, or 6 percent, to 10.35 rand in Johannesburg. Hillside Smelter BHP has the capacity to produce about 1.3 million tons of aluminum a year from plants in South Africa, Mozambique and Australia. Its Hillside smelter, which like Bayside is located at Richards Bay on South Africa’s eastern coast, has a capacity of more than 700,000 tons. Bayside employs about 600 full-time staff and 300 contract workers. Wilkinson declined to elaborate on the options being considered. “Bayside management will engage in a consultation process with union representatives and employees who may be affected,” she said. “We will also engage with customers to explore options regarding an alternative supply of products to the domestic market.” Aluminum for delivery in three months traded at $1,460 a ton as of 6:33 p.m. on the London Metal Exchange. The lightweight metal, used in industries from packaging to aerospace, has fallen 51 percent in the past year.