Rio Tinto U-turns on Tiwai Point aluminium smelter closure by extending ops to 2024

Rio Tinto’s New Zealand Aluminium Smelter (NZAS) in Tiwai Point will continue to operate until December 31, 2024 after reaching an electricity agreement with Meridian Energy, the producer said on Wednesday January 13.

Rio Tinto had said in July last year that it would shut the smelter by August 2021 after a strategic review showed the business was no longer viable due to high energy costs and a challenging industry outlook.
The smelter made an underlying loss of NZ$46 million ($30.2 million) in 2019, and Rio Tinto said its energy costs were among some of the highest in the industry globally.
But in the latest statement on January 13, Rio Tinto said discussions with the New Zealand government are progressing in relation to their commitment to address the smelter’s high transmission costs.
Rio Tinto said a new agreement has been reached with Meridian Energy in relation to power prices, making the smelter economically viable and competitive over the next four years.
“We are pleased to have reached an agreement with Meridian Energy that will enable the Tiwai Point smelter to continue producing some of the lowest carbon aluminium in the world,” Rio Tinto Aluminium chief executive Alf Barrios said.
“This agreement improves Tiwai Point’s competitive position and secures the extension of operation to December 2024. It also provides Rio Tinto, the New Zealand government, Meridian and the Southland community more time to plan for the future and importantly gives our hard-working team at Tiwai and our customers the certainty they deserve,” he added.
The news follows strong gains in the aluminium price. The London Metal Exchange three-month price gained 9.6% over 2020, closing at $1,980.50 per tonne on December 31 from $1,805.50 per tonne at the start of last year.
The price has continued to hover around $2,000 per tonne since the end of 2020. It was most recently trading at $2,006.50 per tonne, having hit an annual high of $2,096 per tonne on December 17. 
Rio Tinto said the extension to the smelter’s operating life also provides time for detailed closure studies to be completed and for NZAS to support the government and Southland community in planning for the future.
Plans for the eventual closure of the Tiwai Point smelter will include extensive stakeholder consultation.
NZAS is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Co Ltd (20.64%). It comprises a tolling plant producing primary aluminium in the form of ingot, billet and rolling block. Rio Tinto’s share of production in 2019 was 279,000 tonnes.

Alice Mason

alice.mason@fastmarkets.com

Published

Alice Mason

January 14, 2021

10:49 GMT

London