SINGAPORE Rio Tinto Plcs Pacific Aluminium unit is
still in talks with a state energy supplier to renegotiate
terms for New Zealands only aluminum smelter, after the
company rejected a short-term government subsidy intended to
keep the plant running.
Pacific Aluminium and Meridian Energy Ltd. have been
renegotiating power contract terms for New Zealand Aluminium
Smelters Ltd. (NZAS) for the past three-quarters of a year.
Our electricity contract negotiations with Meridian have
progressed more in the past two weeks than in the previous nine
months, Pacific Aluminium said in an e-mailed statement
to AMM sister publication Metal Bulletin April 2. We
believe a commercial agreement that is in the best interests of
NZAS, Meridian, the New Zealand government and the people of
Southland (region) can be reached, it added.
The companys statement comes after New Zealands
Prime Minister John Key spoke to local media about the
negotiations. They came back over the weekend and said,
No, we are rejecting the governments intervention
and we will go back to continuing to talk to (state-owned power
firm Meridian Energy), Key said.
The New Zealand government has no interest in a long-term
subsidy of the smelter, Key said. If it cant
stand on its own feet, then long-term, it shouldnt be
Under the current contract, the Invercargill-based smelter must
remain open until 2016 and can then be progressively closed,
Key said. He added that it would be expensive for Rio Tinto to
shut it down faster.
NZAS uses about 15 percent of the nations electricity
output. Closure of the plant would mean a massive power surplus
in a country looking to divest stakes in three state-owned
electricity firms, according to local media.
NZAS, which is 79.36-percent owned by London-based Rio Tinto
and 20.64-percent owned by Tokyos Sumitomo Chemical Co.
Ltd., produces about 360,000 tonnes of aluminum each year.
About 90 percent of that is exported, largely to Japan.
Aluminum smelters worldwide have been suffering from higher
operating costs and low London Metal Exchange prices recently,
and Rio Tintos underperforming Pacific Aluminium unit has
been on the sale block for more than a year. The company took a
multibillion-dollar write-down on its aluminum assets for 2012,
leading to the companys first ever full-year loss (
amm.com, Feb. 14
A version of this article was first published by AMM sister
publication Metal Bulletin.