Rio sees a positive outlook for Tiwai Point smelter

Rio Tinto, International mining giant, the ultimate owner of the Tiwai Pt smelter near Bluff, said the outlook for aluminium was positive despite a 9% fall in spot prices over the year 2013.

The aluminium division of Rio- Rio Tinto Alcan, reported last week underlying earnings of around US$557 million for 2013 - US$503 million higher than in 2012 - and there has been an improvement in the margin.

"Market premia on aluminium shipments have continued to perform strongly during 2013," it said.

The managing director of Salt Funds Management, Matthew Goodson said Rio Tinto's view on aluminium showed the market may be bad than the worst. "And that of course has major implications for New Zealand because of the major swing factor that it has on electricity demand," Goodson said.

Tiwai is the biggest power user of the country as it is responsible for about 13% of the total demand.

Tiwai's operator, NZAS, and Meridian Energy confirmed in August the renegotiation of electricity supply for a long time agreement. The deal involved Government paying Rio an one-off payment of $30 million.

The smelter operates still at less than full capacity but South Port said last week NZAS had confirmed that potential existed to reinstate the 4th aluminium potline later this year.

Rio said in its report the 2013 cash LME aluminium price averaged US$1845 a tonne, a fall of 9% on 2012. "Despite this, the overall demand for primary aluminium was healthy."

Uncertainty over Tiwai smelter has overshadowed the financial future of power generators, especially Meridian, which supplies this smelter.

NZAS is 79.36% owned by Rio Tinto Alcan and 20.64% by the Sumitomo Chemical Company.