Smelter closure: Why Ullrich and Stabicraft are already importing aluminium

Friday, 31 July 2020

Stabicraft chief executive Paul Adams says suddenly closing the smelter would be bad for Southland but it already needs to buy most of its aluminium from overseas.

The closure of the Tiwai Point aluminium smelter shouldn’t greatly dent the prospects of local manufacturers that rely on aluminium to make products, the two best-known firms in the industry say.

Ullrich Aluminium employs about 300 staff in New Zealand and about the same number in Australia making a wide range of products for the building industry and other markets.

“We won’t run out of aluminium; that is what some of our customers are ringing to ask,” Ullrich Aluminium chief executive Gilbert Ullrich said.

The company already sourced some of its aluminium from smelters in other countries including Australia and Qatar, and was likely to import more metal from Qatar if the Tiwai smelter closed as planned next year, he said.

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“They make a lot of structural aluminium alloys that we use a lot of.”

While the Tiwai Point smelter made a “fine product”, any aluminium smelted from virgin ore rather than scrap metal was suitable for most of Ullrich Aluminium’s needs, Ullrich said.

In what might seem like a case of “coals to Newcastle”, Paul Adams, the chief executive of Invercargill boat builder Stabicraft, said it already sourced the majority of its aluminium from overseas.

Stabicraft employs about 130 people making aluminium boats for New Zealand customers and export markets.

Most of the metal Stabicraft used was aluminium sheets which needed to be produced at rolling mills, of which there were none in New Zealand, Adams said.

“Tiwai produces ingots but not finished products that we could source directly from them.”

Ullrich Aluminium employs about 300 staff in Hamilton and says it has alternative metal suppliers lined up.

So Stabicraft had sourced its sheeting from a variety of mills in “France, Bahrain, the United States and China”, he said.

Adams said the closure of the smelter wouldn’t help Southland’s “growth plan” to boost its population by 10,000 by 2025, and might impact the local demand for boats.

But the bigger effect would be on companies that supplied the smelter, rather than those that used its products, he said.

“In all honesty, I don’t think anything from the point of view of purchasing products is really going to change.

“Aluminium is priced on the London Metals Exchange or in Shanghai and because it is a commodity, people pay whatever the going rate is.”

Gilbert Ullrich – a member of Amnesty International and Free Tibet and a vocal opponent of the free trade agreement with China – said China would be “the last place” that he would buy aluminium from.

The dumping of “throw-away” aluminium products from China was more of a threat to Kiwi manufacturers than the closure of the smelter, he believed.

Ullrich Aluminium operates two extrusions lines in Hamilton and one in Australia and Ullrich said he wasn’t expecting job losses.

“We will ride through it.”

Ullrich said the years of uncertainty over the smelter’s future had been one reason why it hadn’t made sense for anyone to invest in a rolling mill.

The Tiwai Point smelter was “getting pretty old” and majority owner Rio Tinto had not invested in some innovations, with the market moving towards the use of lighter aluminium alloys, he said.

Ullrich said EnPot – a new technology coincidentally developed by Auckland University spin-off Energia Potior – had the potential to change the economics of aluminium smelting.

EnPot’s system of heat exchangers which have been deployed by German aluminium-maker Trimet allows smelters to turn up or down their power input to take more advantage of off-peak electricity pricing.

”People are building smelters and they are to be honest more efficient.”

Rio Tinto, is understood to be in negotiations with its main electricity supplier, Meridian Energy, about a deal that could see the smelter stay open some time beyond its planned closure date of August next year.

The price of aluminium this week rose through US$1700 (NZ$2540) a tonne.

That is about where it was when Rio Tinto announced its “strategic review” of the smelter in November and above the price the metal traded at during most of 2015 and 2016, but still down on its average price during the past 15 years.