As Aluminum Rises, Brazil Ponders Fate of Key Ingredient Maker

(Bloomberg) -- The largest plant for a key aluminum ingredient will know within a month whether it can go back to full production, as a partial shutdown adds further uncertainty to a market rattled by Russian sanctions.

Norsk Hydro ASA’s giant Alunorte alumina refinery in Brazil has been running at 50 percent since a late-February court order amid accusations that a rainstorm led to contamination of an Amazonian river. Now Judge Leonam Gondim da Cruz Junior of the Para state court has the task of weighing two opposing assessments of what happened after the plant was besieged by heavy rains.

As Aluminum Rises, Brazil Ponders Fate of Key Ingredient Maker

“After reviewing Hydro’s motion, along with the other side’s claims, I should be able to make a ruling in the next 15 to 30 days,” the judge said from his office in state capital Belem. He denied the Norwegian company’s earlier appeal of the partial shutdown.

The reduction in output has already led Hydro to declare force majeure on alumina shipments and on Tuesday the company said it would cut aluminum output in half at a nearby smelter that gets all of its alumina from Alunorte.

The disruption -- playing out as U.S. sanctions on Russian aluminum giant United Co. Rusal ripples through the metal’s supply chain -- has helped send an alumina index to a five-month high. It’s also exacerbating a bitter dispute between supporters and opponents of the plant, with the economy of the Amazonian town of Barcarena hanging in the balance.

As Aluminum Rises, Brazil Ponders Fate of Key Ingredient Maker

On Monday, the company sought to temper concerns its refinery contaminated water supplies and put residents’ health at risk after flooding in and around the operation in mid-February. Both its internal audit and an independent review are being harshly criticized by local prosecutors and researchers.

“The company raises questions without legal or scientific basis,” local prosecutor Eliane Pinto Moreira told reporters Tuesday after she and her team announced they had filed a motion to keep Alunorte at reduced production. "The role of a company is to offer effective and concrete responses, not cast doubt over the institutions that represent Brazilian society."

The refinery’s internal auditors said there was no evidence of any spill. In a motion filed Tuesday, Hydro’s lawyers cited federal environmental watchdog Ibama and the Para state regulator as concurring with their analysis.

A large part of Hydro’s presentation Monday sought to discredit studies conducted by Brazil’s government-backed Evandro Chagas Institute in the wake of the incident. The institute released data it says shows both wastewater leaking outside Hydro’s plant and nearby water supplies contained abnormally high levels of aluminum; 55 times above the acceptable level in one case.

“All their samples for heavy metals are within drinking water quality,” Hydro spokesman Halvor Molland said by email when asked about the institute’s findings. Some samples showing turbidity and aluminum can be "associated with sewage and general flooding," he said.

In 2009, Hydro published a sustainability report in which it leaned on the institute’s research to prove it had not contaminated water supplies after a similar incident of heavy rains and suspected leaking of waste water.

The main thrust of Hydro’s argument to have the court order overturned focuses on whether or not there was a spill or risk of another, according to documents obtained by Bloomberg. The company says the plant can operate safely and it’s now committed to investing more in environmental monitoring.

As Aluminum Rises, Brazil Ponders Fate of Key Ingredient Maker

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