Rio Tinto to close New Zealand aluminium smelter

RIO Tinto has announced that it is winding down operations at its Tiwai Point aluminium smelter in New Zealand.

Rio Tinto cites the high energy costs in New Zealand as the main reason for the closure, with the company making a loss of NZ$46m (US$30m) in 2019 at the Tiwai Point smelter. The challenging outlook for aluminium in the short to medium term is also a factor. According to The Australian, aluminium prices have fallen from US$2,500/t in 2018 to current levels of US$1,620/t.

Rio Tinto had a power supply agreement with Meridian Energy for another ten years, but has now given notice to terminate the power contract in August 2021. Discussions with other interested parties for the power contract could not reach a viable outcome.

Alf Barrios, Rio Tinto Aluminium Chief Executive, said: “We recognise the decision to wind down operations at New Zealand Aluminium Smelters (NZAS) will have a significant impact on employees, the community and our customers.

“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.”

MP Grant Robertson said: “Given the challenging economic situation caused by Covid-19 it is disappointing Rio Tinto has chosen to close the smelter at this time, especially given the support New Zealand has shown the company and how profitable they are globally.”

MP Megan Woods said: “Rio Tinto’s decision not to extend their generous power contract with Meridian will flow through to the rest of the market. Eventually it will free up around 13% of total power generated in New Zealand which will relieve some pressure to build new generation. The increased supply will also have a positive impact on prices.

“It is disappointing that Rio Tinto is deciding to close one of the world’s lowest-carbon aluminium smelters, in favour of keeping open coal plants. I also want to make clear that the Government expects Rio Tinto to meet their obligations for cleanup of the site (an estimated NZ$256m) and do the right thing on the dross.”