Slovakia’s only aluminium producer will end production after 70 years

Slovakia's only aluminium producer is shutting down its smelters after 70 years of production.

Slovalco, which is based in the central Slovak town of Žiar nad Hronom, says that after decades of production it can no longer afford to run its last ten remaining furnaces. Without the producer, Slovakia will be forced to buy aluminium from foreign sources, Slovalco writes.

The aluminium producer had been steadily restricting production in response to rising energy prices. According to the producer, Slovalco originally operated 226 furnaces. The number of furnaces in operation was decreased by 40 percent just over a year ago, citing high energy costs. Alumnium smelting is among the most energy intensive of all industrial processes.

“The company Slovalco operates based on a long-term contract concerning supplies of electrical energy,” said managing director of Slovalco Milan Veselý when the firm began restricting its operations. “With this type of business, which needs stability and predictability to adopt long-term solutions, we conclude long-term contracts.”

Slovalco points fingers at ministry

The situation around the current, complete shutdown could have been avoided, the company suggests.

“The shutdown of production is the result of the inaction of the government – the inaction of Environment and the former Finance Minister Igor Matovič (chair OĽaNO). During the last years, they blocked the adoption of an amendment which would have adjusted the amount of compensation for energy-intensive enterprises to the level of other industrialised EU countries,” Slovalco wrote.

Veselý says he warned about the current scenario, but that the government took an interest in the company only when it was too late. No firm decision was made, despite Slovalco being of strategic importance for Slovakia, as aluminium mainly goes to car companies – and with the arrival of Volvo in Košice, demand is expected to increase.

In July 2022, 133 out of 226 electric furnaces - electrolysers - were running, making Slovalco the largest consumer of electricity in Slovakia. At full capacity, it consumes eight percent of the country's entire electricity production.

Although the price of aluminium on the stock exchange has been high, the cost of electricity was and is at such a level that, according to the company's management, Slovalco would have been producing at a deep loss during 2023. Shareholders would probably have accepted the losses for a while, but they saw no light at the end of the tunnel.

Despite the complete shutdown and the absence of financial support from the government, the producer does not plan to withdraw from the market for good. Slovalco will attempt to maintain the equipment within the factory at stable levels in order to allow for production to restart. For this, however, the producer would still need financial support from the government, writes Veselý.

First furnaces, then employers

The shutdown of the furnaces is not the only measure that has been taken to save the producer from bankruptcy.

About 300 of the company's employees, out of 450, lost their jobs last summer. A further 2,500 jobs tied to aluminium manufacturing were thereby put at risk. Slovalco now plans to gradually lay off its remaining employers, who have kept the production and operation of its furnaces running.

In the meantime, Slovalco will operate a remelting centre to process aluminium waste, which the company put into operation in June last year after the closure of primary aluminium production.

The rising cost of energy has affected other major employers and producers in Slovakia. About a week after Slovalco announced cuts to its production last year, ferro-alloy manufacturer OFZ, based in Oravský Podzámok (Žilina Region), decided on a similar step.