Global aluminium prices bounce back, but 'day of reckoning' still looms
Sunday, 17 January 2021
Rio Tinto's decision to extend the life span of its aluminium smelter at Tiwai Point comes at a time when global aluminium prices have rebounded.
In July Rio Tinto announced it planned to wind down operations at Tiwai Point in August this year because of high energy and transmission costs.
However, on Thursday it announced a new power deal with Meridian Energy had been reached and it would continue operating until the end of 2024.
Soon before the initial closure announcement last year, global aluminium prices had dropped to $1491.73 per tonne, but it was now trading at closer to the $2000 per tonne mark.
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It was not far from the 2-year peak of $2067 per tonne.
Although economist Cameron Bagrie did not believe that recovery in global aluminum prices would have had a lot to do with Thursday’s announcement.
Smelter general manager Stew Hamilton said the deal and Thursday’s announcement had centred on the smelter getting a “competitive price” for power with its provider, Meridian Energy. Although Hamilton declined to say what it was.
Bagrie said when companies made decisions it would average the commodity prices out over a longer period of time taking in any peaks and dips that might occur.
He felt the decision was more a case of ‘buying time’ for all involved.
It had simply pushed out the ‘day of reckoning’, in terms of the likely smelter closure, Bagrie said.
He said it bought time for Rio Tinto to make some firmer decisions, but most importantly it provided Meridian the time to find a replacement consumer. It would also provide time to further develop the required transmission infrastructure to potentially transport electricity generated at Manapouri to other parts of the country.
The Manapōuri Power Station produces 800MW of electricity annually which is supplied to operate the smelter at Tiwai Point.
The smelter uses about 13 percent of New Zealand's electricity, or the equivalent of about 776,000 houses, to put it into perspective.
Bagrie remains adamant plan B needed to be found and the energy providers had four years to find an alternative large consumer that was part of a sustainable industry.
At 6.5 percent of Southland's GDP Bagrie said the smelter was an important part of Southland's economy, but he said it hadn’t provided Southland's growth in the last 10 years.
Ngai Tahi Maori Trust board chair Sir Tipene O’Regan said there was no time to sit back.
“We now have time for a serious discussion on a strategic reset of our national energy arrangements. “That reset must take place in the context of our move towards a low-carbon economy and climate change as well as our need for foreign exchange.
“If a managed transition is nothing more than a regional job protection scheme then we will miss an intergenerational opportunity,” he said.
O’Regan has previously said that Ngai Tahu would like to see Tiwai Point developed into a green hydrogen plant.
He believed a move towards sustainable and renewable green hydrogen was a “no-brainer”.