Rio to conduct strategic review of New Zealand’s Aluminium Smelter to determine future profitability

According to a report on October 23, the global miner Rio Tinto Limited has flagged a possibility to close production at its New Zealand’s Aluminium Smelter (NZAS), citing weakness in the aluminium market and high energy costs.

NZAS is a joint venture between Rio Tinto (79.36%) and Sumitomo Chemical Company Limited (20.64%), with almost 1000 employees at the present.

The company said it would conduct a strategic review of the smelter to determine the operation’s ongoing viability and competitive position. It will even explore options and try to identify economically viable solutions to find a pathway to profitability and for that, it said it would hold discussions with the Government of New Zealand and energy providers. By 2020, the review is expected to be concluded.

“We expect the short to medium outlook for the aluminium industry to be challenging and this asset to continue to be unprofitable,” the miner said in a statement.

This move comes a week after Rio reported a year-on-year drop in aluminium production by 3 per cent in the September quarter.

Rio Tinto Aluminium chief executive Alf Barrios said “The aluminium industry is currently facing significant headwinds with historically low prices due to an over-supplied market. This means that many aluminium providers are reviewing their positions.”

Separately, New Zealand’s Meridian Energy Ltd, which supplies electricity to the site, noted Rio’s review and said its supply contract runs to 2030.

Meridian chief executive Neal Barclay said, “NZAS officials have advised us that the economics of the smelter have been challenged due to volatile international prices for aluminium, relatively high energy and transmission costs and an upcoming refurbishment bill to keep one of the potlines operational.”