Bayside aluminium smelter threatened as domestic demand drops - BHP Billiton

The viability of BHP Billiton's Bayside smelter in South Africa was at risk because of a decline in domestic demand, said the biggest aluminium producer on the continent. "The financial viability of the smelter is at risk," Bronwyn Wilkinson, a spokeswoman for the company, said in an e-mailed response on Friday. "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 tons a year, produces so-called "value-added" aluminium products such as billets and rods. South African manufacturing fell at an annual rate of 15 percent in February, the biggest decline since at least 1991. Hulamin, Africa's largest aluminium processor and a BHP Billiton customer, said on Thursday it was in talks with the aluminium producer that might affect its share price. Johannes van Niekerk, a spokesman for Hulamin, declined to comment. BHP Billiton rose 1.09 percent to R185 at the close of Johannesburg trading. Hulamin fell 5.99 percent to R10.35 at the close of trade on the JSE. BHP Billiton has the capacity to produce about 1.3 million tons of aluminium a year from plants in South Africa, Mozambique and Australia. Its Hillside smelter, which like Bayside is located in Richards Bay, 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 engage with customers to explore options on an alternative supply of products to the domestic market." Aluminium for delivery in three months traded at $1.451 (R12.96) a ton on the London Metal Exchange and has fallen 52 percent in the past year. - Bloomberg