Experts: New Zealand Aluminium Smelter’s Future Seems Secure Thanks to Weak Kiwi and Stronger Aluminium Prices

Experts: New Zealand Aluminium Smelter’s Future Seems Secure Thanks to Weak Kiwi and Stronger Aluminium Prices

The New Zealand Aluminium Smelter (NZAS) at Tiwai Point in Invercargill, opens the year with cautious optimism for the near term, as rising aluminium prices and the falling New Zealand dollar means breaking even is becoming less difficult.

According to a report in the domestic media, NZAS is stable for the short and medium terms. However, the whole picture will not crystallize until quarterly reports become available in the coming weeks, they warn.

Analysts indicate that, for every one cent drop in the value of the New Zealand dollar relative to the United States dollar, the smelter gains NZ$6 million (US$4.18 million) per year. As New Zealand’s currency has lost over 25¢ in the past two years, the smelter has come that much closer to profitability.

NZAS’s power agreement with Meridian Energy, which runs to 2030, gives the smelter the right to terminate in 2018 or later if it gives a year’s notice. Sunday, the earliest date on which the smelter could give notice to terminate, passed without a closure announcement, which workers and experts alike consider a favorable sign.

However, not all news is good for the smelter. The price of 172 megawatts of the smelter’s 572-megawatt intake increased on January 1. Although it is not publicly known what the smelter pays for electricity, the number experts consider most likely is 4.8 cents per kilowatt hour, which increased to just over six cents per kilowatt hour on Sunday. Energy prices are slowly inching up for the smelter, as New Zealand’s Electric Authority is slowly backtracking on a promised rate cut. As it stands now, it will pay between NZ$41.9 million and NZ$60.8 million for power this year, which is far in excess of the power costs it expected to pay.

The smelter is believed to continue operating despite rising electricity prices, but the public will not be given a definite answer until the company issues its submissions to the Electric Authority in February.