Tiwai Point aluminium smelter expected to be operating despite the shutdown option

Southland's Tiwai Point aluminium smelter which employs 800 people and brings $500 million annually to the region's economy now has an options in its power contract to terminate its contract with the power provider by giving one year’s notice.  

However, the smelter is expected to be operating despite the shutdown clause.

The LME aluminium price has more or less stabilized recovering from constant lows and and the New Zealand dollar has dropped from unsustainable highs, which in turn is expected to help the company to break even on a daily basis.

Once the company's results for 2016 are released in the next few months, it may give a clear indication of its future. However, it is almost certain that the plant is not going to shut down in the short to medium term.


Power supply to the Tiwai Point smelter is ensured, thanks to the existing electric supply agreement with Meridian Energy till 2013. The plant has the right to terminate that agreement any time from 2018 by giving one year notice time.  Legally, Sunday 1 January 2017 was the first day available for the smelter to announce a closure.  However, such an announcement has not happened and the bullish market trend is expected to improve things for better.

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Even one-cent fall in the New Zealand dollar against the US dollar can net the smelter $6 million annually and the NZ dollar has been constantly falling in last two year. It is supported by a healthy rise in LME aluminium prices.

The price of electricity from National grid is going up. One portion of its electricity prices that smelter pays rose on last Sunday. The Electricity Authority is gradually winding back a once-promising cut in the price the smelter must pay for the national grid. The smelter now has to pay $60.8m annually for its electricity share of the grid, and would have to pay at least $41.9m, which would be a far higher price than the company’s expectations.

The company however, would be operating despite that cost and the status would become clearer once it issues its submissions on the authority's proposal next month. The smelter exports aluminium products worth $1 billion annually and the local government is supporting the plant in whichever way possible.