(Updates with detail on output cut, background) March 15...

(Updates with detail on output cut, background)

March 15 (Reuters) - The Australian unit of U.S. aluminium producer Alcoa Corp AA.N said on Wednesday output at its Portland smelter in Victoria would be reduced to about 75% of its total capacity of 358,000 metric tonnes per year, citing instability and production challenges.

Australia's Alumina Ltd (AWC) owns a 40% stake in Alcoa Australia, which holds a 55% stake in the Portland Aluminium joint venture.

The smelter, which was previously operating at about 95% of its total capacity, is contending with uncertainty and hurdles related to the production of rodded anodes necessary to transport electricity into the smelting pots, Alcoa Australia said in a statement.

"Our teams are focused on safely taking the production offline and working to restore stability across the facility," Rob Bear, vice president for operations at Alcoa's domestic business, said.

The cut in production will begin immediately, it said, without setting out a timeline on when the smelter would return to full capacity.

Alcoa's local unit had, earlier this year,

flagged

a 30% production cut at its partially owned Kwinana alumina refinery due to a gas supply shortfall.