The Australian federal and New South Wales (NSW) state governments have committed A$2.5bn ($1.77bn) to keep UK-Australian mining firm Rio Tinto's 590,000 t/yr Tomago aluminium smelter in NSW running until 2038.
Tomago's current power supply agreement is set to expire on 31 December 2028, but the subsidy will support a 10-year power purchase agreement (PPA) for the smelter until 2038, which will be fully powered by renewable energy from 2033, Rio Tinto said on 13 August.
The government funds will be used to build 3GW of new renewable generation and firming capacity, the federal government said today, finalising a promise made in late 2025.
Rio Tinto will also invest A$1.1bn of its own capital to fund the PPA, including a A$100mn allocation to decarbonise the smelter.
Rio Tinto owns 51.55pc of Tomago. The remainder is controlled by Australian distributor Gove Aluminium Finance and Norwegian producer Norsk Hydro, with 36.05pc and 12.4pc respectively.
Rio Tinto also operates the 39mn t/yr Weipa and 13mn t/yr Gove bauxite mines in northern Queensland, as well as the 3.95mn t/yr QAL and 1.7mn t/yr Yarwun alumina refineries near Gladstone in Queensland.
Rio Tinto's 190,000 t/yr Bell Bay aluminium smelter in Tasmania also deserves similar federal support, Tasmanian premier Jeremy Rockliff said on 12 August.
Federal and state governments gave A$2bn to Rio Tinto's 500,000 t/yr Boyne smelter in central Queensland in March to subsidise its operations until 2038. They have also issued billions of dollars in grants and loans to copper, steel and zinc smelters since last year.
Price uncertainty
Taxpayers will "receive the added benefit of a monetary return on [the] investment" if aluminium prices rise, the government said.
Aluminium prices have been supported since February by supply disruption in the Mideast Gulf caused by the US-Iran war, as well as strong electric vehicle demand in China.
But acute supply tightness has pushed prices higher than demand levels would normally justify, meaning that an end to the conflict may push prices down again. Prices have already dropped sharply from a peak in early June following expectations of a resolution to the war.
Moreover, supply fundamentals could shift well before 2038, as Indonesia is set to almost triple aluminium production to 2.5mn t/yr by 2027.
Argus-assessed London Metal Exchange aluminium cash official prices were down at $3,307.250/t on 12 August (see graph).
