NZ smelter terminates power contract and winds-down operations
Rio Tinto gears up for the wind-down of operations and the eventual closure of New Zealand Aluminium Smelters (NZAS) following the conclusion of its strategic review which has shown the business is no longer profitable given high energy costs and a challenging outlook for the aluminium industry.
As a result, NZAS has given thje local power provider notice to terminate the power contract, which will end in August 2021, when the wind-down of operations is expected to complete.
New Zealand’s Aluminium Smelter (NZAS) converts alumina into aluminium using renewable hydroelectricity, resulting in one of the lowest carbon footprints for an aluminium smelter in the world.
The smelter is located on Tiwai Peninsula in Southland and the majority of the plant’s alumina is supplied from Yarwum operation and Queensland Alumina Refineries refineries. Around 90% of the aluminium produced at NZAS is exported.
NZAS is a joint venture owned by Rio Tinto (79.36%) and Japan’s Sumitomo Chemical Company (20.64%). It employs around 1000 people directly and creates a further 1600 indirect jobs in Southland.
The tactical review concluded that the smelter, which has made Rio Tinto an underlying loss of NZ$46m in 2019, is not economically viable due to energy costs that are some of the highest in the industry globally, coupled with a challenging short to medium term aluminium outlook.
Extensive discussions with a wide range of interested parties have failed to secure a power contract that will enable the operation to become both competitive and profitable.
During the next few months, Rio Tinto and NZAS will work closely with partners as detailed planning is undertaken to wind-down operations, and eventually close the smelter.
“We recognise the decision to wind-down operations at NZAS will have a significant impact on employees, the community and our customers,” Rio Tinto Aluminium chief executive Alf Barrios said.
“It is not a decision we have made lightly and without significant careful consideration. It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financially viable business. We will therefore terminate the power contract and move to close the operation.
“We are committed to working with our partners as we progress through detailed planning towards closure and we will do all we can together with the government to find ways to support the Southland community.”
Rio Tinto is a mining and metals company operating in around 36 countries around the world. Its four product groups include: Aluminium, Copper & Diamonds, Energy & Minerals and Iron Ore.