The Ogre Is Dead

Alcoa is shutting down the Kwinana refinery. Everyone in Western Australia should rejoice.

"Alcoa chief operations officer Matt Reed on Tuesday said the decision was driven by the age of the 60-year-old plant, its small size, high operating costs, low bauxite grades currently being mined and a poor market for the aluminium ingredient it produces."

That's putting the lipstick on the pig. Every year of mining alumina in Western Australia is an egregious crime, and has been so for years.

Not only are all the alumina refineries in Western Australia old, but they are unfathomably ancient and inefficient.

The low grades are not a recent thing. Western Australia's bauxites are low by Australian standards, if not low by global standards. Bauxites out of Guinea are pushing 41% alumina content. Now, of course, it's not all about grade with alumina, as there's silica and reactive silica, and there's oxalates and not all iron is the same. It's a complicated thing, and certainly Alcoa in Western Australia hasn't been mining the highest grade bauxite, but it's not the worst bauxite around. But bear in mind, you can find ore with more alumina in lakes, if only you could find 5 billion tonnes of it.

The real reason Kwiana was shut down is a confluence of issues that have come to head in the past 2-3 years and have allowed an opportunity to close the refinery and to 'lose' 1,100 jobs.

Firstly, 1,100 jobs is about politics. Kwinana and Wagerup are large scale industrial employers, with 'good' jobs, by which one must understand the divide between blue collar (or fluoro collar) jobs and pink collar and white collar jobs. You could probably google a dozen photos of Tony Abbot or Scott Morrison cosplaying as alumina workers for a minute in Kwinana; it's good tradie-positive politics. Prior to the advent of Kemerton, battery alley and the rest of Kwinana over the past 15-20 years, the alumina industries in Perth were one of the biggest single-site employers. They were irreplaceable large-scale industrial employers, and they wielded their power accordingly.

Politics after COVID in Perth has been weird. Mark McGowan once enjoyed a 90% approval rating, even Kim Jong Il wanted to know his secrets. Doubtless Roger Cook is trailing that, and will see a stiff swing against him as politics returns to normal, but 2023 is the year for Cook to put the subsidy wand in the back pocket and kill the ogre.

Employment in Perth is strong, and prospects for skilled industrial chemical plant operators is off the charts. Arguably, letting Kwinana pass away now is the perfect time to do it; we are bringing online and finishing several spodumene trains. We have a Ni-Co intermediates (CAM) plant being built by IGO/Wyloo, and there's a dozen more companies planning or hoping into being critical minerals plants. Retrenched Kwinana employees will get a fat redundancy, a holiday, a new jet ski and Prado, and probably shoot off up to Geraldton to work at Iluka's cracking plant. This is pain free, politically, and the virtue of easing skills shortages and inflation can truthfully be played up.

Next we have the environment. Alcoa has not rehabilitated a single hectare of disturbance in 60 years. You can see the scars from fucking space.

This is 2023. Rumours have circulated for a month, at least, that the expansion of the mine plan was knocked back on the grounds that Alcoa had not proven an ability to rehabilitate. Now we must ask - what chance do they have to meet a mine closure plan? Fucking zero. We'll be wearing this moonscape of uselesness for decades, and we will all pay for 1,100 jobs of union-backed kleptocracy and client state servitude. The public will cop the rehab bill, of this there is no doubt. Grease your nethers everyone for the bad news ahead.

This isn't even the only environmental blight that alumina has perpetrated on Perth. Aloa also found it hard to meet a 30% reduction (or so it's said) in their water allocation. This was entirely achievable, mind you, with dry stacking and the like, but when you're mining shit ore on a subsidy, and suddenly the government has the electoral luxury of not giving a shit about your blackmail, you find that the world of real competition is frightening, and the government is holding your toes to the fires of impossible resource constraints.

Water consumption in the Perth water system, in one of the driest continents on Earth, is a difficult trade-off of politics of the green lawn versus the red mud versus the gold inland at Kalgoorlie. Kwinana was never worth saving, even when it was built, and certainly Perth has grown it out of sensibility, and thankfully the confluenza of COVID and politics and the environment has finally conspired to unalive this dog. We cannot justify the water consumption that Kwinana alumina embodies.

Then, we have to add in the whole issue of power. Making alumina is a frightfully expensive and energy intensive process. It takes around 11 tonnes of carbon to mint a tonne of alumina in a 60 year old plant. Wagerup, which is profitable, is in receipt of $8.8M of ARENA funding to trial mechanical vapor recompression (MVR) as a means of slashing energy use (this should work; but expect a considerable bill to be footed by taxpayer subsidies). Even so, this will only be sickly green.

The issue of energy is also broader than this. Kwianana alumina's gas consumption is around 5% of Western Australia's domestic gas consumption, just on one site out of the three in southwest W.A.. With Wagerup and Pinjarra, the three alumina plants consumed around 20-30% of the entire State's gas, and a significant amount of electricity (previously supplied from coal, but recently, increasing amounts of gas, wind and solar). The chances of W.A. meeting emissions targets (whatever they are) has suddenly shot up significantly with the closure of Kwinana. Gas availability in the state is going to be higher; gas that would otherwise be burned propping up a subsidy trap will now be burned making lithium, nickel, cobalt and rare earths. This is a good result for the State, and the globe in general, as Kwinana will be replaced by newer, more efficient alumina refineries elsewhere.

The downside is, of course, these plants are bedrock customers for the State owned utility, Synergy, and Western Power. It will be interesting to see how the grid responds to less stable demand and somewhat lower demand, with increasing penetration of rooftop PV and wind. My bets are that the new gigawatt batteries will replace this demand.

What now, and who next?

The demise of the Kwinana alumina refinery is a good thing on all fronts, freeing up workers into a skills shortage, water into a dry continent, gas into a gas-constrained industrial ecosystem, and electricity into a grid that is shedding coal and carbon, and needs more flexibility than massive, energy-hungry industries with relatively few workers, can supply.

We will have a couple of years before Aloca sells out its interests in Wagerup and Pinjarra, immediately the inevitable betrayal of the environment and rehabilitation of the alumina mine scars becomes publicly apparent, and Alcoa sheds C-suite scalps into fluffy golden parachutes running investment banks in Switzerland, and the company re-domiciles.

We will have a few years as the gas, electricity and water systems stabilise after the closure and no one misses the ogre.

Within months of the redundancies, no one will rue the job losses. Within a year or two we might not even notice the benefits, as skills shortages will return.But maybe we can close Wagerup and Pinjarra too.

By then, hopefully, someone has solved the problem of the red mud which will haunt our shores for thousands of years. But before then, we will hear cataclysmic predictions about a few hectares of bush being cleared somewhere else for some other mine, and hear tales of how it's ruining the environment. But never mind that; we have borne six decades of environmental madness for the benefit of a few thousand people, and we just never noticed the damage.