Rio Tinto to cut down production at its Boyne aluminium smelter

Rio Tinto today announced that the company will slash aluminium production worth more than $110 million and 30 jobs due to high power prices in the state at its Boyne aluminium smelter. The company will reduce up to 45,000 tonnes of aluminium production in 2017.

Rio Tinto’s decision comes after Alcoa’s Portland smelter in Victoria struck a deal for subsidised power and that the Australian Energy Regulator conducts a report into spikes in Queensland’s wholesale power price.

Commenting on the move Queensland’s state owned power supplier, Stanwell said it was Rio only who was to blame for such production downsizing.  Richard Van Breda, Chief Executive of Stanwell said, “If Boyne had accepted one of the many offers presented to it, not only would it have avoided the current volatility in spot prices but it would have been in a better financial position, as the contract prices offered are now at a significant discount to the spot market.”


He further stated: “High prices in Queensland’s wholesale electricity market are currently being driven by high demand in response to very hot weather conditions across the state.”

Spot electricity prices in Queensland surged $12,000-$14,000 per MWh last weekend as compared to $66.80 per MWh the weekend before.

Boyne general manager Joe Rea said, “This is the second time in three years we’ve had to curtail production on a large scale because of uncompetitive electricity prices. Boyne is paying more than 500 times more than what it costs to generate electricity. The decision to curtail production is a very difficult one.”

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Rea explained, “Boyne has been unable to secure an internationally competitive price for our additional load. We are not prepared to lock into a contractual arrangement that would have us paying delivered energy prices comparable to the least competitive countries in the world outside of China.”

Boyne aluminium smelter, nation’s second-biggest smelter located at Gladstone, produces around 576,000 tonnes of aluminium in a year. Gladstone Power Station, 42 per cent owned by Rio and rest from spot markets, provides 85 per cent power to Boyne aluminium smelter.