NZ's only aluminium smelter seeks Government support amid 'challenging' market conditions

The owners of New Zealand's only aluminium smelter in Southland are looking at shutting up shop over "market conditions" and "high energy prices".

The Tiwai Point Aluminium Smelter near Bluff is owned by mining giant Rio Tinto and Japanese corporation Sumitomo, via a joint venture called New Zealand Aluminium Smelters Limited (NZAS). 

Rio Tinto Aluminium chief executive Alf Barrios said in a statement on Wednesday that under "current market conditions and with high energy costs", the outlook for the aluminium industry is "challenging" in New Zealand. 

"The aluminium industry is currently facing significant headwinds with historically low prices due to an over-supplied market. This means that many aluminium providers are reviewing their positions."

He said the company intends to hold discussions with the Government and energy providers to explore options to find a pathway to profitability for the smelter. 

"Rio Tinto will work with all stakeholders including the Government, suppliers, communities and employees in order to find a solution that will ensure a profitable future for this plant."

A "strategic review" of Rio Tinto's New Zealand operation will consider "all options", including closure, which could affect up to 1000 employees. 

Tiwai Point aluminium smelter near Bluff.
Tiwai Point aluminium smelter near Bluff. Photo credit: Getty

Tiwai Point has frequently operated at a loss, such as in 2012 when it lost $548 million.

The smelter received a $30 million bailout from the Government under former Prime Minister John Key. He said in 2015 that was it and that the company would receive no more. 

"Obviously I would be deeply concerned if they did close because the Government did everything it possibly could to support the aluminium smelter basically to stay," Key said at the time. 

Energy and Resources Minister Megan Woods said on Wednesday the position of the Government hasn't changed since then. She pointed to support the smelter already receives from Meridian Energy. 

Tiwai Point is the largest electricity consumer in New Zealand, and in 2007 the smelter struck a deal with Meridian Energy for the continuous supply of power until 2030.

Woods said she doesn't know the details of the deal between Meridian and the smelter, but she said she would assume it's "pretty good". 

She pointed to the International Energy Agency's report on electricity prices in New Zealand which found that industrial prices are relatively flat compared to consumer. 

Energy and Resources Minister Megan Woods.
Energy and Resources Minister Megan Woods. Photo credit: Newshub

The smelter produces some of the world's purest aluminium, according to reports

Woods said she hopes the smelter will remain open and "continue to back the Southland economy by trading on its position as producing the world's greenest, low-carbon aluminium". 

She said she will "certainly be meeting with them and talking with them". 

"I've made it really clear to them that this is an independent process... it has to run its course."

National leader Simon Bridges said the Government's ban on new offshore oil and gas exploration is putting pressure on the energy market, but Woods said the smelter hasn't raised that as a concern. 

The Government considered building a second smelter at Aramoana in 1980, but it didn't go ahead.