Lower aluminium prices blamed for $46m loss

Rio Tinto subsidiary Pacific Aluminium has reported an underlying net loss of $46 million related to its interest in the New Zealand Aluminium Smelter Ltd for the 2019 year.

Pacific Aluminium, a 79% shareholder in New Zealand's Aluminium Smelter, says the loss is a result of consistently lower and volatile aluminium prices, coupled with uncompetitive energy prices.

The company said 2019 aluminium prices were 15% lower during 2019 than the prior year, averaging $US1791 a tonne.

NZAS chief executive Stew Hamilton said the result  underscored the reasons for the strategic review at Tiwai Point smelter, which last year made $NZ422 million in payments to New Zealand suppliers, including $NZ58 million to suppliers in Southland.

It is one of two smelters in the world producing ultra-high purity aluminium and the only one producing this using electricity generated from renewable sources.

“No matter how hard or efficiently the team here works, we can’t consistently off-set the high price of power and transmission charges we face. This means we swing from delivering small profits to losses for our owners, making our financial viability uncertain,” Mr Hamilton said in a statement.

"If we can secure an internationally competitive power arrangement that enables us to be consistently profitable and a transmission charge that more accurately reflects the service we receive, NZAS will be well placed to continue to be a vibrant part of the New Zealand economy, providing primary metal to local kiwi businesses and remaining a major export to Japan.”

Mr Hamilton said the electricity costs were the highest of any smelter in the world.

"Most smelters, especially those located close to generation like NZAS, pay considerably less."