Australia’s Albanese Pledges Deal to Save Rio Aluminum Plant
(Bloomberg) -- The owners of Australia’s largest aluminum smelter have agreed to upgrade the plant as part of a government-backed rescue package aimed at keeping operations running beyond 2028.
Prime Minister Anthony Albanese visited the Tomago facility on Friday to pledge financial support, months after majority owner Rio Tinto Group warned that soaring energy costs could force the smelter to close when an existing electricity supply contract expires later this decade.
Rio — together with its partners Gove Aluminium Finance Ltd. and Norsk Hydro ASA — will spend at least A$1 billion ($666.5 million) on maintenance and upgrades as a condition of the state’s backing. It will also investigate decarbonization opportunities for the smelter, the government said in a statement.
Higher energy costs have hurt the power-intensive aluminum industry worldwide, leading to a wave of closures or cutbacks — even as the sector in China thrives. Western governments have also become much more prepared to step in to support metals producers amid concerns about Beijing’s grip on manufacturing.
“The aluminium industry is no longer competing against foreign companies but against foreign governments writing the rules to their own advantage,” Australian Aluminium Council CEO, Marghanita Johnson, said in a statement.
Albanese said the federal government and authorities in New South Wales would work with the smelter to secure a long-term, fixed-price power contract for the facility. Separate arrangements will be made to accelerate renewable energy generation and storage for it.
“We are working with the NSW government to make sure that there is a long-term energy solution to go forward beyond 2028,” Albanese said earlier on Friday at a media conference carried by Australian TV.
Rio’s Australia-listed shares were trading up 2.4% by 4:05 p.m. Sydney time.
The announcement reflects collaborative work to address “one of the most complex energy challenges facing Australian industry”, Rio’s Chief Executive Officer Simon Trott said in a statement.
Rio owns just over half of the Tomago plant, which has operated for more than four decades. In October, Rio said it had begun a consultation with more than 1,000 employees to discuss the future of the facility.
(Updates with comments from Australian Aluminum Council in fifth paragraph.)
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