Production cut by one third at Rio's Lynemouth aluminium smelter in the UK

LONDON (Reuters) -Rio Tinto (RIO.L) (RIO.AX) has cut production by one-third at its Lynemouth aluminium smelter in north-east England, a company spokesman said on Monday. But, despite the growing list of production curtailments analysts expect inventories of the metal to continue to build as demand weakens. "Rio Tinto has temporarily suspended about one-third of production at Lynemouth, partly due to high electricity prices and also because of low aluminium prices," a spokesman said. The plant in Northumberland has the capacity to produce around 175,000 tonnes of primary aluminium. Analysts estimate that cutbacks totalling over 2.0 million tonnes per year or five percent of global output have been announced so far. But many believe this will still not be enough to turn the market around as global economic weakness hits demand for the metal used in transport, construction and packaging. "High cost capacity is cutting back, but at the present what we're seeing is too little too late," said independent consultant Angus MacMillan. "I suspect we've not seen the last of this by a long chalk, and I would expect stocks to continue to build," MacMillan added. The Rio Tinto spokesman said the idling of capacity at Lynemouth was very much a temporary decision. He said maintenance work would be carried out during the shutdown to make the smelter more efficient and the firm hoped to re-open it in 2009. He also made the point that the company had not made any employees redundant. The capacity affected at Lynemouth, which produced around 133,000 tonnes of metal in the first nine months of this year, was idled about two weeks ago. "In general high-cost capacity in North America and Western Europe is going to face a crunch in the next year or so," MacMillan said. By 1313 GMT the London Metal Exchange (LME) three-months aluminium price MAL3 was up at $1,803/13 a tonne, from $1,752 at Friday's close.