Rio Tinto is planning to shut down its New Zealand aluminium smelters after a strategic review found the business was no longer “economically viable”.
Rio Tinto is planning to shut down its New Zealand aluminium smelters after a strategic review found the business was no longer “economically viable”.
The NZAS business is a joint venture between Rio Tinto and Japan-based Sumitomo Chemical.
Rio said NZAS had made an underlying loss of $NZ46 million in 2019, and would not withstand high energy costs and a challenging outlook for the aluminium industry, with Alcoa of Australia citing similar concerns in its 2019 full-year financial report.
Alcoa and joint venture partner Alumina operate the Portland aluminium smelter in Victoria, which has largely relied on government subsidies to stay open; with the most recent being a $200 million, four-year support package from the Victorian government due to expire next year.
That package, along with $40 million in federal government funding, was to ensure the smelter stayed open until 2021.
Today, Rio Tinto said following discussions with interested parties, the company was unable to secure a power contract that would allow NZAS to be both “competitive and profitable”.
NZAS has now notified Wellington-based Meridian Energy to terminate its power supply contract, which will end in August 2021 when the winding down of operations is also expected to complete.
Around 2,600 direct and indirect jobs are likely to be affected by the closures.
Rio Tinto aluminium chief executive Alf Barrios said the decision to close its NZAS business would have a significant impact on employees, as well as customers.
“It is not a decision we have made lightly and without significant careful consideration,” Mr Barrios said.
“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.”
Mr Barrios said Rio would work with its partners to progress the planned closure over the next 14 months.
The company owns close to an 80 per cent interest in the NZAS business, and Sumitomo around 20 per cent.
Shares in Rio closed up 3.3 per cent to trade at $98.67.
