Rio Tinto to close New Zealand aluminium operations

UK-Australia resources firm Rio Tinto will close its aluminium operations in New Zealand next year because of high energy costs and a tough outlook for the sector.

The decision to wind down operations at the Tiwai Point smelter at Southland on New Zealand's South Island and close New Zealand Aluminium Smelters (NZAS) by 31 August 2021 follows the completion of a strategic review that started in October last year.

The closure is mainly the result of energy costs and a challenging short- to medium-term outlook for the aluminium industry, Rio Tinto said.

NZAS is 79.36pc owned by Rio Tinto and 20.64pc by Japan's Sumitomo Chemical. It produced 67,000t of aluminium in January-March this year and 279,000t in 2019.

NZAS made a loss of NZ$46mn ($30mn) last year, blamed on energy costs that Rio Tinto said are some of the highest in the global industry.

"It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financial viable business. We will therefore terminate the power contract and move to close the operation," Rio Tinto's aluminium chief executive Alf Barros said.

The Tiwai Point smelter, which accounts for 13pc of New Zealand's power demand, is supplied by the 850MW Manapouri hydropower station. Local power generator Contact Energy said the smelter closure could push up electricity costs and may lead to the closure of the 377MW Taranaki combined-cycle gas-fired power plant.

Rio Tinto produced 783,000t of aluminium from smelters in Canada, Australia, New Zealand, Iceland and Oman in January-March. Its production guidance for 2020 is 3.1mn-3.3mn t.

The company said in February that it was reviewing its ISAL aluminium business in Iceland, which operated at 85pc of capacity in January-March. Wholly-owned by Rio Tinto, ISAL produced 45,000t of aluminium in the first quarter and 184,000t in 2019.

By Angus Macmillan