Rio Tinto will start planning for the slowdown of operations and the eventual closure of New Zealand Aluminum Smelters (NZAS) following a strategic review that showed the business is no longer viable given high energy costs and a challenging outlook for the aluminum industry.
As a result, NZAS has given Meridian Energy notice to terminate the power contract, which will end in August 2021, when the wind-down of operations is expected to be completed.
The strategic review concluded that the smelter, which has made Rio Tinto an underlying loss of NZ$46 million 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 aluminum 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, according to NZAS.
During the next 14 months, NZAS and Rio Tinto will work closely with partners as detailed planning is undertaken to wind down operations, and eventually close the smelter.
“We recognize the decision to wind down operations at NZAS will have a significant impact on employees, the community and our customers,” Rio Tinto Aluminum 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.
NZAS is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Co. Ltd. (20.64%). It employs around 1,000 people directly and creates a further 1,600 indirect jobs in Southland.
