Rio Tinto to review options for unprofitable Iceland aluminum smelter

London — Rio Tinto plans to conduct a strategic review of its 205,000 mt/year ISAL aluminum smelter in Iceland "to determine the operation's ongoing viability and explore options to improve its competitive position," the mining group said Wednesday.

Production at ISAL has already been reduced to 85% of the smelter's capacity due to its lack of profitability. The strategic review "will consider all options including curtailment and closure, and will be complete in the first half of 2020," Rio Tinto said.

ISAL "is expected to remain unprofitable in the short to medium term in the challenging conditions facing the aluminium industry, due to the smelter's uncompetitive energy costs and historically low aluminium prices," the company said.

Earlier this month, three-months aluminum prices on the London Metal Exchange hit three-year lows, falling below $1,700/mt for the first time since the beginning of 2017.

Rio Tinto plans to continue discussions with the government of Iceland and power provider Landsvirkjun on how the smelter can return to profitability and become competitive in the global market.

"We have worked intensively to improve ISAL's performance, however it is currently unprofitable and cannot compete in the challenging market conditions due to its high power costs," said Alf Barrios, chief executive of Rio Tinto Aluminium.

"Rio Tinto will review options for the smelter, with the aim of finding a solution for ISAL to become an economically viable business," he added.

In February 2018, Rio Tinto had reached an agreement to sell the ISAL smelter to Norwegian aluminum producer Hydro, along with its interests in Dutch anode facility Aluchemie and Swedish aluminium fluoride plant Alufluor. The parties, however, signed a termination agreement in September 2018 at Hydro's request to end the transaction.

Rio Tinto produced 3.171 million mt of aluminum in 2019, and has forecast 2020 output at 3.1 million to 3.3 million mt.