Tiwai Point smelter’s net profit down NZ$53 million in 2018

Pacific Aluminium (New Zealand) Limited (PacAl NZ), a subsidiary of Rio Tinto, has reported its interest in the Tiwai Point smelter operated by New Zealand Aluminium Smelters Limited (NZAS). Smelter’s underlying earnings came in at NZ$22 million in 2018, down NZ$53 million from NZ$75 in 2017.

This result reflects that during 2018 the operating environment became significantly more challenging, according to the release. The average LME price in the second quarter stood at US$2,259 per tonne. But then decline to US$1,971 in the fourth quarter.

“While the New Zealand dollar averaged 0.69 US cents lower than 0.71 during the previous year, the increasing and volatile cost of raw materials throughout the year meant this provided little relief.”

The smelter’s aluminium production increased 0.9 per cent year-on-year to 340,111 tonnes in 2018.

NZAS Chief Executive and site General Manager Stew Hamilton said: “This smaller profit doesn’t represent the efforts of the team here at Tiwai Point. The smelter produced 340,111 tonnes of some of the lowest carbon aluminium in the world in 2018, an increase of 0.9 per cent on the previous year and I am very proud of that result.”

 “However we are facing a very tough time right now with the LME down to US$1,761 per tonne and predicted ongoing volatility in the market. One of the hardest things for our team to cope with is the very high costs we face that are beyond our control. We pay one of the highest transmission prices of any smelter in the world and our overall power cost is high by international standards. That makes it incredibly hard for NZAS to compete in the highly competitive aluminium market no matter how efficient our team is.”

NZAS paid NZ$66 million in transmission costs alone last year.

“We support a ‘user pays’ approach to transmission costs and support reform of the way charges are currently allocated, which sees NZAS pay a large share for the grid upgrades in the upper North Island,” said Hamilton. “But even that process of reform won’t give any relief from these incredibly high costs for at least another three years and in the meantime we are paying nearly NZ$1.3 million every week.”

NZAS has paid NZ$334 million in transmission costs over the past five years and spent slightly under NZ$2 billion dollars on employee costs and local suppliers, including power costs.