Mozal’s power lifeline hangs by a thread as shutdown clock ticks, but the minister remains optimistic

After months of news about South32's Mozal smelter coming to a halt, the mineral resources and energy minister Estevao Pale, on Monday, said that the Mozambique government is undertaking every measure possible to keep the smelter up and running in the coming times. This was informed by the minister on the sidelines of a conference, which was held in Cape Town, South Africa.

Six years of negotiation, yielding nothing

Tracing back to July 2025, South32 reflected a strong FY25 performance by exceeding the aluminium targets, mainly due to two of its smelters, one being the Brazil Aluminium, which surpassed the target by 6 per cent and then there is the Mozal smelter, which also exceeded by 1 per cent, with the sales output rising by 13 per cent. Now, the question arises: with such outstanding smelter performance, what made the firm decide to halt production? This is mainly due to the rising challenge owing to the power supply uncertainty.

In the same month, South32 had to write down the value of its majority stake because of the unresolved power supply issues, irrespective of six long years of negotiation for a new electricity agreement. Since aluminium production is a highly power-dependent process, the new affordable supply agreement has made the firm reassess the long-term value of the smelter. During this period, the smelter gathered electricity primarily from Hidroeléctrica de Cahora Bassa (HCB), Mozambique’s state-owned hydroelectric provider.

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Challenges above challenges

However, the tension still looms as the current agreement is set to expire in March 2026, and without an alternative supply security, the firm alerted investors to the potential risk of a major asset write-down. And as a cherry on top, the drought condition posed a potential limitation in generating sufficient hydroelectric power. With the March 2026 deadline approaching fast, the firm still faces the challenge of running energy-dependent assets in markets where long-term infrastructure certainty remains elusive.

Care and maintenance post closure

Negotiations failed to secure a sustainable energy solution for the Mozal smelter; the firm, back in August 2025, announced its plan to place the operations of Mozal Aluminium on care and maintenance from March 2026. As for the impairment charge, South32 flagged USD 372 million, mainly due to the growing uncertainty back then in terms of securing the smelter's long-term viability.

For care and maintenance, the firm will incur USD 60 million as a one-time cost to undergo the transition. This includes expenses related to employee separations and the ending of contracting agreements.

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Affecting the European market?

In December, South32 shared its plan to shut down its Mozal aluminium smelter, which will take away 560,000 tonnes of annual production capacity, likely tightening the global supply and pushing Europe to look for alternative sources. In the first ten months of 2025, Mozal exported nearly 430,000 tonnes to customers in the EU, making up about 20 per cent of the bloc’s primary aluminium supply.

Nonetheless, the closure is expected to exacerbate Europe’s supply issues, especially with an annual demand of 9 million tonnes. Given this, the analysts made an assumption of a global shortfall of around 600,000 tonnes next year, which means Europe may have to increase imports from Canada and the Middle East. This comes at a time when carbon costs linked to the CBAM, restrictions on Russian imports and strong LME prices hovering around USD 2,880 per tonne are keeping the market quite tight.

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Any plans to seal a power deal?

As per the current negotiation underway, 350 MW from HCB, where Cahora Bassa can supply nearly 950 MW and the remaining 600 MW could come from Eskom, which would be required by the Mozal smelter by March 2026. Minister for State Administration, Inocêncio Impissa, has also pointed out that selling electricity to Mozal at the suggested rates would lead to losses, as those rates fall below both production and transport costs.

Mozambique is committed to ensuring a supply of 350 MW from HCB to Mozal starting in March, at a minimum price that covers costs, including adjustments for 2028. Now, the question that still looms over every miner in the aluminium industry is whether the Mozal smelter will be able to secure enough electricity to kick-start with full capacity post March 2026?

To know more about the global primary aluminium industry 2026 outlook, book the report “Global ALuminium Industry Outlook 2026".