BHP Billiton, analyst differ on power pricing regime for aluminium smelters
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Any major change to the electricity pricing regime for mining major BHP Billiton’s aluminium smelters in Richards Bay will have a severe impact on the smelters’ commercial viability and sustainability, which could cause significant job losses and, therefore, have a major impact on the South African economy, the mining company states.
According to research done in 2012 by South African economic analysis and business modelling services consultancy Econometrix, the BHP Billiton Bayside and Hillside smelters jointly created 7 000 jobs in KwaZulu-Natal (KZN), primarily in the Richards Bay area, positively impacting on the livelihood of more than 33 000 people in northern KZN.
The 2012 Econometrix report states: “The aluminium industry has given rise to a downstream industry. Sales to the downstream industry total 278 000 t, worth R6.7-billion. It is highly likely that, if the aluminium smelting industry had not developed in this country, the downstream industry would not have developed to the extent it has.”
However, energy analyst Chris Yelland believes that the BHP Billiton smelters are, in fact, subtracting value from the local economy, as these smelters are highly energy intensive and, according to him, no true beneficiation takes place.
“No bauxite is mined in South Africa and the conversion of bauxite into alumina is also done in Australia. The alumina is then shipped to Richards Bay, where it is turned into aluminium using reduced energy tariffs, after which the aluminium is exported once again. Producing aluminium is an energy-intensive process and, therefore, one could argue that BHP Billiton is in effect exporting electricity during a time when South Africa is experiencing a shortage,” Yelland says.
