‘Not commercially viable’: Aluminium giant faces potential closure

3 hours ago 3

The owner of Australia’s biggest aluminium smelter has begun consulting its 1000-plus workers over the plant’s future as negotiations with state and federal ministers over a potential rescue package are yet to land on a solution to keep it open.

Tomago Aluminium, which is majority-owned by mining giant Rio Tinto, is approaching a crippling blowout in energy costs at its 40-year-old smelter in NSW when its existing electricity contract with AGL expires in 2028.

The Tomago smelter faces an uncertain future with its power supply deal with AGL running out in 2028.

On Tuesday the company said it had reached the “difficult point” of beginning consultations with its large workforce and trade union representatives about the possibility of the site’s closure.

“Despite extensive engagement and market approaches, Tomago is yet to identify a pathway that supports commercially sustainable operations beyond 2028,” it said in a statement.

“As a result, Tomago Aluminium has reached a point where it must contemplate ceasing operations at the end of its current electricity supply contract.”

Because processing alumina into aluminium is extremely energy-intensive, the Tomago smelter ranks as the single biggest electricity consumer on Australia’s eastern seaboard, and the cost of energy accounts for more than 40 per cent of the plant’s operating expenses.

‘Unfortunately, all market proposals received so far show future energy prices are not commercially viable.’

Jerome Dozol, Tomago Aluminium chief executive

Tomago Aluminium chief executive Jerome Dozol said electricity contract offers it had received for coal-fired generation and renewable energy from 2029 would undermine the smelter’s economics and viability.

“We continue to engage with stakeholders on a viable pathway for Tomago,” he said.

“Unfortunately, all market proposals received so far show future energy prices are not commercially viable, and there is significant uncertainty about when renewable projects will be available at the scale we need.”

Tomago Aluminium, Australia’s largest aluminium smelter, produces up to 590,000 tonnes a year of the metal, which is widely used to manufacture construction materials, cars, drink cans, foil packaging and electrical products. Aluminium is also increasingly in demand in the construction of solar panels and wind turbines.

If a taxpayer-funded support deal for Tomago is reached it will mark the fourth time the Albanese government has intervened to prop up a struggling metals processor this year, after it contributed to bailouts of Glencore’s Queensland copper smelter and refinery earlier this month, Nyrstar’s smelters in Port Pirie and Hobart in August, and the collapsed Whyalla steelworks in February.

Dozol said no decision on Tomago’s future has been made, and the company remained focused on operating safely and giving its workers “certainty as soon as possible”.