Australia's government will need to provide short-term financial support to aluminium producers or risk undermining its low-emissions manufacturing ambitions, as high energy costs threaten domestic refined metal output and exports.
The government announced long-term production subsidies for low-carbon aluminium processors in late 2024, aiming to eliminate net carbon emissions by 2050. But near-term economic pressures could prevent many existing aluminium producers from surviving long enough to benefit from the scheme without immediate support.
UK-Australian producer Rio Tinto may close its 190,000 t/yr Bell Bay smelter at the end of December because of high energy costs. The company has been negotiating a power purchase deal with Australian utility Hydro Tasmania for 18 months.
Hydro Tasmania's current offer prices electricity above the level Rio Tinto needs to operate the plant sustainably, Tasmanian energy minister Nick Duigan said on 9 April.
Bell Bay was a net recipient of carbon credits under the Safeguard Mechanism — Australia's excess carbon scheme — for reporting lower scope 1 CO2-equivalent emissions than its baseline in the 2023–24 financial year to 30 June, because it is largely powered by hydroelectric plants.
It appears to be a prime candidate for the federal government's A$2bn low-emissions aluminium production credit scheme, which will offer tailored tax incentives from the 2028–29 financial year.
But the extended rollout means Bell Bay may shut before receiving any credits. The government has yet to outline clear eligibility criteria, preventing Rio Tinto from making investment decisions based on the scheme.
Even if criteria were released immediately, Rio Tinto would still face a wait of nearly three years before receiving credits — increasing the risk of closure.
Bell Bay is not alone. Rio Tinto's largest Australian smelter, the 600,000 t/yr Tomago plant in New South Wales (NSW) may also need support to manage energy costs.
NSW spot energy prices averaged A$128.16/MWh (US$83.40/MWh) in 2024–25, up from A$101.57/MWh in 2023–24 and just A$35.17/MWh a decade ago. Prices have averaged A$86.52/MWh so far in the 2025–26 financial year, though this only reflects winter months.
Tomago, which uses 850MW of power, currently relies on coal-fired generation. Rio Tinto plans to transition the plant to full renewable power by 2035, aligning with the government's low-emissions goals.
Like Bell Bay, Tomago could qualify for low-emission production credits within the next decade as Rio Tinto increases its renewable energy purchases. But the credits are unlikely to ease cost pressures during the transition.
The federal government is aware of the challenge. Industry minister Tim Ayres has indicated he is prepared to use capital from the A$15bn National Reconstruction Fund to support projects.
"Australians can expect a government that is in support of domestic manufacturing but absolutely determined to act in the national interest," Ayres said in early October.
The minister has already backed four struggling metal processors this year. He agreed to inject up to A$600mn into Glencore's Queensland copper smelters on 8 October. State and federal governments have also supported zinc and lead refiners and ferroalloy producers in 2025.
Recent support packages have ranged from multi-year deals to short-term cash injections. Each negotiation is handled independently, and the government cannot guarantee support for specific facilities, Ayres said.
One alumina plant — Alcoa's Kwinana refinery — shut down without government support. The company did not request financial assistance before the closure.
Without continued support or policies to address energy costs, Australia's metal processors risk shutting down plants before long-term support measures take effect.
