Good news for Rio Tinto's Bell Bay aluminium smelter, with the new power deal inked, it will be running for at least the next 14 months. This came as the Tasmanian government decided to extend its power supply agreement temporarily. This extension ensures production stability while talks are underway regarding a potential federal government support package aimed at securing the smelter's long-term future.
Where the issue arose
The Bell Bay aluminium smelter, nestled close to Launceston, supports about 500 jobs. As per the recent electricity supply agreement, Tasmania's state-owned power generator will run out on December 31. Back in April, Rio Tinto expressed concern regarding this pressing issue, highlighting that there's still "material uncertainty" about the smelter's operations after 2026.
Bell Bay, among multiple aluminium smelters and refineries in Australia, is grappling with operational hurdles due to rising energy costs, pressures from carbon pricing and intimidating global competition. Considering these challenges, the Albanese government is looking into various financial support options, which could help the federal government with billions of dollars in spending.
Tasmanian Energy Minister Nick Duigan has announced an "in-principle" agreement to extend the Bell Bay power contract through December 2026. With this extension, the smelter can have extra time to create a long-term operational framework. The Minister further reflected that the smelter, powered by low-carbon hydroelectricity, must be a focus for support initiatives from the federal government.
Nick Duigan stated, "As we have seen across the country, federal government support is necessary to provide the smelter with a sustainable operating trajectory, when coupled with a new long-term energy arrangement with Hydro Tasmania. It would be a perverse outcome for the federal funding arrangements to exclude the nation's principal green aluminium smelter. The smelter injects USD 700 million of economic activity into Tasmania annually, and we are committed to its future."
Bell Bay smelter production output
As per the industry standards, the Bell Bay smelter operates at a small scale, producing just about 37 per cent of what Queensland's Boyne smelter produces and 32 per cent of the output from New South Wales' Tomago facility last year. This site creates financial loss for Rio Tinto, with its Bell Bay subsidiaries covering different stages of aluminium production and reporting a total loss of USD 18.5 million in 2024, following combined losses of around USD 35 million in 2023.
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Marinus Link: The new connection
Tasmania established ties with the National Electricity Market (NEM) through the Marinus Link project, funded by taxpayers from the federal government, Victoria and Tasmania. This new high-voltage cable aims to provide three times the capacity of the current interconnector between Tasmania and Victoria, making it easier for Tasmanian energy producers to reach mainland consumers.
A spokesperson from Rio mentioned that this temporary extension would ensure "continued safe and stable production". In contrast, discussions are on for a possible 10-year supply agreement and as the federal government ends with a USD 2 billion green aluminium production credit scheme.
Tensions Rise at Liberty Bell Bay
Uncertainty is growing around the future of Liberty Bell Bay as it wrestles with financial and legal challenges. Situated just two kilometres from Rio Tinto's Bell Bay aluminium smelter, this manganese smelter, owned by BHP, is now with South32 and is currently under the management of industrialist Sanjeev Gupta's GFG Alliance. Currently, the plant, which provides jobs for about 350 workers, has its operations on hold after being mothballed in May.
Senior executives from GFG recently met with the US customers at the annual ferromanganese conference in Florida from October 19 to 21 to discuss market price trends and the company has made it clear that production will not start until the situation improves.
A spokesperson for GFG pointed out that the rising costs of energy and manufacturing in Australia, along with a dip in market demand, is putting significant pressure on the business. Liberty Bell Bay is also reportedly looking for more clarity regarding its US customer base. The facility recorded a USD 80 million loss for the year ending June 2025.
Tensions have been rising with the Tasmanian government, which has issued legal notices to GFG after providing a USD 20 million taxpayer-funded loan in August to buy 48,000 tonnes of ore for restarting the plant. This shipment has yet to be processed since arriving on October 5.
Authorities have accused GFG of violating several loan conditions, including a stipulation that prohibits using Liberty Bell Bay as collateral for other operations within the group. Documents filed in London suggest that this condition may have been overlooked.
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