Rio Tinto’s Tiwai Point Aluminium smelter future remains uncertain

Rio Tinto’s Tiwai Point aluminium smelter near Bluff in Southland of New Zealand is one of the largest manufacturing facilities kept active amid COVID-19 epidemic lockdown.

The major reason for keeping it active as it takes weeks for proper shutdown and again re-starting takes months. Tiwai point is considered as the biggest employer of Southland, though the plant’s long-term future remains uncertain.

The smelter contributes around $400 million per year to the region’s economy, with 1000 staff and contractor working at the site and another 1300 jobs directly linked to the smelter.

Graham Budd, Great South chief executive, said: "There wouldn't be anyone in Invercargill or Southland who doesn't know somebody directly or indirectly who would be affected. So that's a real wellbeing issue for our community.”

The smelter is running 24/7 amid the lockdown, but that hasn't changed the uncertainty for workers.

Rio Tinto, the multinational mining giant is once again looking at closing a part or full of the smelter. It's threatened that before. But this time, after reporting a loss here of $46 million, the signs were doomier.

An international team was sent to Tiwai Point during November’19 to review with exact reasons that would be involved in pulling down the plant.

Stew Hamilton, the CEO, New Zealand's Aluminium Smelter (NZAS), said: "It's the first time that Rio Tinto has called a strategic review of the NZAS operating site and it's looking at significantly changing the price of electricity for the site, or considering other options.”

Since then, the price of aluminium has slumped to a five-year low and now COVID-19 has thrown an extra spanner in the mix.

Tiwai recently started a controlled shutdown of the smallest of its four potlines, redeploying affected staff, but closing the plant altogether would send shockwaves.

Hamilton said: “To put Tiwai's future beyond doubt; it needs to slash its electricity costs.”

Tiwai Point smelter uses 12% of the country's power and pays about 10% of New Zealand's transmission costs. But Rio Tinto has argued and came out with a statement that: “its electricity comes via a dedicated 150-kilometre transmission line from Manapouri hydro station, which is just 3% of the transmission network.”

A review by the Electricity Authority could cut more than $10m a year off the smelter's power bill, but not until 2024.

Hamilton also said: "For us, 2024 is too far away. We're struggling significantly now, and we need to have acted sooner than that.”

Tiwai Point has tried to stay competitive in the global aluminium market by focusing on the top end. It's one of only two smelters in the world producing ultra-high purity aluminium, which goes into the likes of smartphones, TVs, and high-end electronics.

But the higher price for its aluminium is still not enough to offset its power bill.

Six years ago, the Key Government gave Rio Tinto a $30m sweetener to stick around, but that was not enough to control the losses.

Hamilton added: “We don't want a hand-out, we don't want a subsidy. We just want a fair price for transmission."