Rio’s French smelter at Dunkirk under threat without new power deal

Rio Tinto’s endeavors to keep open one of its French smelters raises questions not just about the viability of this particular plant but aluminum smelting in Europe in general.

The smelter in question, according to Reuters, serves as the largest aluminum plant in the European Union with 2012 production of 286,600 metric tons. Positioned on the coast near Dunkirk in northern France, the plant uses the most electricity across any other entity in the country. It consumes 485 megawatts per hour, or half the output of one nuclear reactor at the nearby Gravelines site.

The problem for Rio involves the 25-year contract with the French utility EDF which expires at the end of 2016. At which point its electricity bill – said to be 23% of production costs – could rise as much as 80% from 2017, as contract prices catch up. To Rio’s credit they have invested in the plant in an attempt to reduce power consumption. The company spent 32 million euros renovating the anode ovens which will improve efficiency in the future.

However, the plant desperately needs a new power contract that assures its future.

The energy plan for the Dunkirk plant involved the use of excess electricity from two nuclear reactors originally destined for Iran. Back in 1985, and as a result of the 1979 Islamic revolution, the French government put the two reactors in Gravelines in Northwest France. The French firm Pechiney started the aluminum smelter in 1991. Rio also owns another smelter in France, the 148,812 ton Saint-Jean-de-Maurienne plant in the French Alps, but attempts to sell that operation to Trimet don’t appear hopeful.