SYDNEY, Feb 23 (Reuters) - BHP Billiton will suspend production at its TEMCO manganese alloy
smelter in Tasmania, Australia by early to mid-March and conduct a review of the business, citing stiff international competition and rising operating costs, the company said on Thursday.
'Recently, there has been further erosion of its international competitiveness due to the strong Australian dollar and steady increases in input costs, including in reductants and electricity,' the company said in a statement.
At the same time, manganese alloy markets in Europe and North America have been weak and global prices remain low, it said.
BHP is the world's largest producer of manganese, used to strengthen steel, mining 3.25 million tonnes of ore from operations in Australia and South Africa in the December 2011 half-year period.
The weak market situation for manganese was being exacerbated by a large stockpile of ore at Chinese ports and poor demand for steel long products, according to metals traders.
'While measures have been taken to make the operation as cost effective as possible, these have not been sufficient to counter shifts in the market, increased costs of production, or operating losses,' BHP said.
Over the next three months, BHP said it will review the long-term future of the operation.
Permanent employees of TEMCO will not be immediately affected by the suspension, though the number of outside contractors working at the facility will be cut, BHP said.
The operation began production in 1962 and remains the only manganese ferroalloy plant in Australia. It incorporates four furnaces and a sinter plant and produces high-carbon ferromanganese, silicomanganese and sinter. Production has run as high as a quarter-million tonnes per year.
BHP also mines manganese on the Australian mainland and in South Africa.
Roughly 80 percent of manganese ore production is sold directly to external customers. The remainder is fed to the TEMCO smelter and another facility in Meyerton, South Africa, according to BHP.
BHP earlier this month cited a 22 percent decline in ore prices and a 10 percent decline in alloy prices as a 'major drag on profitability' of its manganese division in the half-year period to December 31, 2011.
Recovery, particularly of the construction industries in Europe and North America, could lead to a firming of manganese ferroalloy prices starting in 2013, according to a report this month by London-based Roskill Information Services.
(Reporting by James Regan; Editing by Michael Urquhart) Keywords: AUSTRALIA BHP/
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