New Zealand’s Tiwai Point Aluminium Smelter witnessed a sharp drop-off in profits last year, and the site’s management says a shifting global aluminium market may continue to make life difficult for the smelter over the current fiscal year.
Pacific Aluminium (New Zealand) Limited released results for the previous year yesterday that reflected a year-on-year drop of NZ$53 million in profits last year to NZ$22 million.
Though the statutory profit after tax came to NZ$207 million, reversing a loss from the prior year, an after-tax adjustment of NZ$186 million dropped the site’s underlying after-tax profit to a five-year low.
NZAS Chief Executive and site General Manager Stew Hamilton was quick to point out that the weak financial numbers last year were despite a strong production effort at the plant.
“This smaller profit doesn’t represent the efforts of the team here at Tiwai Point. The smelter produced 340,111 tonnes of some of the lowest carbon aluminium in the world in 2018, an increase of 0.9 per cent on the previous year and I am very proud of that result.”
“However we are facing a very tough time right now with the LME down to US$1,761 per tonne and predicted ongoing volatility in the market,” he continued. “One of the hardest things for our team to cope with is the very high costs we face that are beyond our control. We pay one of the highest transmission prices of any smelter in the world and our overall power cost is high by international standards. That makes it incredibly hard for NZAS to compete in the highly competitive aluminium market no matter how efficient our team is.”
Hamilton continued by saying the company prefers a “user pay” paradigm for transmission costs, including a reform in the transmission system that would have his firm bearing the majority of the cost of grid upgrades.
“But even that process of reform won’t give any relief from these incredibly high costs for at least another three years and in the meantime we are paying nearly NZ$1.3 million every week,” he lamented.
NZAS noted that the past five years has seen the smelter pay NZ$334 million in power transmission costs and just under NZ$2 billion in employee costs and local supplier costs, which includes power costs.
NZAS is a joint venture operation owned by Pacific Aluminium (New Zealand) Limited (79.36%), and Sumitomo Chemical Company (20.64%). Pacific Aluminium (New Zealand) Limited is the managing partner, and is a wholly owned subsidiary of Rio Tinto.