Rio Tinto Group has entered into talks with Australian authorities over a potential multibillion-dollar bailout for its Tomago aluminium smelter, with discussions focusing on the electricity supply contract for 2026 to 2029 and the design of production tax credits to shield the operation from spiralling power costs. According to people familiar with the deliberations, any rescue package is likely to be “more sophisticated” than a simple cash hand-out and is being negotiated chiefly with the New South Wales state government.
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Tomago, in which Rio Tinto holds the majority stake, consumes roughly 12 per cent of New South Wales’s total power generation, making it the state’s single largest electricity user. Such voracious demand underlines both the plant’s strategic importance to the national aluminium industry and its vulnerability to energy price shocks. The smelter produces up to 590 thousand tonnes of aluminium annually, cementing its place as Australia’s largest producer.
Faced with higher wholesale electricity prices, Rio Tinto has set an ambitious decarbonisation roadmap for Tomago: it plans for renewables to supply more than half of the smelter’s power requirements by 2030 and to eliminate reliance on fossil fuels entirely by 2035. This trajectory aligns with federal initiatives unveiled in January when Australian Prime Minister Anthony Albanese committed AUD 2 billion (USD 1.3 billion) to establish Green Aluminium Production Credits. The scheme is designed to incentivise Australia’s smelters to transition to renewable generation by 2036.
Broader market dynamics, however, are complicating recovery efforts. Aluminium prices, already under pressure from US-imposed levies – recently doubled to 50 per cent under President Trump’s tariff agenda – have slipped by 4 per cent since the start of the year. Such volatility not only erodes profit margins for Tomago but also raises questions over the long-term viability of high-energy-intensity aluminium operations in Australia unless structural support measures are enacted.
Albanese, whose center-left Labor government was re-elected last month, has described Trump’s move as “an act of economic self-harm by the United States that will increase the cost for consumers” in the US.
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