The plant would have been Rio Tinto's largest worldwide, with the capacity to produce 674 000 t/y. It had been scheduled to start operating in 2016.

"This was a difficult decision to make, given that we have very much enjoyed the professionalism and collaboration of the Paraguayan authorities," the company's Canadian subsidiary Rio Tinto Alcan said in a statement. "Having said that, we cannot avoid the reality of current market conditions."

Finance minister German Rojas said that the decision was driven by the company's need to cut costs in the face of fragile world commodity prices, aluminium prices in particular.