ISAL (above) says it pays significantly more for its energy than other aluminum producers in Iceland. (Photo: Rio Tinto)

Rio Tinto has submitted a formal complaint to the Icelandic Competition Authority (ICA) alleging abuse of market dominance by Landsvirkjun, the energy supplier to Rio Tinto’s ISAL aluminum smelter in Iceland. Rio Tinto is asking the ICA to address anti-competitive conduct by Landsvirkjun through discriminatory pricing and long-duration power contracts, so the ISAL smelter and other Icelandic manufacturing and businesses are able to compete internationally.

“Landsvirkjun’s abuse of its dominant position in the Icelandic energy market needs to be addressed or Iceland is in danger of losing export industries with major employment like ISAL,” Rio Tinto Aluminum Chief Executive Alf Barrios said. “ISAL pays significantly more for its energy than other aluminum producers in Iceland, which undermines its competitive position in the market.

He added that Rio Tinto will not be able to continue to produce aluminum in Iceland if the pricing system is not “transparent, fair and internationally competitive.”

Rio Tinto’s complaint alleged that pricing terms of the power agreement with Landsvirkjun are discriminatory, abuse its market dominant position and cannot be justified. Landsvirkjun’s supply contracts bind customers to long-duration terms, rendering it impossible for alternative energy suppliers to either enter the Icelandic market or expand operations, the company said.

Rio Tinto actively engaged with Landsvirkjun this year in an attempt to ensure a sustainable future for the smelter and the 500 people that work there. Despite numerous efforts to constructively engage, Rio Tinto said it has concluded that Landsvirkjun is not ready to provide electricity purchase conditions that will allow ISAL to become sustainable and competitive, and to address its abusive and discriminatory conduct.

Rio Tinto announced a strategic review of the ISAL smelter on February 12. Rio Tinto is concluding the first phase of the strategic review with the filing of the ICA complaint. If Landsvirkjun does not address its abusive conduct, Rio Tinto said it will have no choice but to consider terminating its energy contract and plan for the closure of the smelter.