A worthwhile investment in the future of New Zealand aluminium

It is proposed the world’s first large-scale green hydrogen plant could be built in Southland...
The Tiwai Point smelter. PHOTO: STEPHEN JAQUIERY
A sustainable Tiwai smelter is good for New Zealand, Andrew Perchard writes.

The recent confirmation about the 20-year power contract for NZAS’ Tiwai smelter is welcome.

Good news for Otago, the South Island, and for New Zealand. The implications of Rio Tinto becoming the sole owner of NZAS, however, remain to be seen.

The ODT’s editorial admirably rehearsed many of the reasons for the relief of the signing of the 20-year power contract. Three other important considerations deserve highlighting: national resilience; security; and sustainability.

The first two of these factors have been recognised by the European Union in their enshrining of aluminium within the Critical Materials Act, a measure which both provides security to an industry under pressure and also necessitates greater transparency on supply chains and sustainability.

Aluminium is vital to most aspects of modern life from packaging to defence, a fact that New Zealand governments will recognise.

It’s now almost 50 years since the advent of the ‘‘Think Big’’ initiatives. The challenges we face require that sort of boldness and far-sightedness from the state to ensure national resilience and security of supply. Aluminium is also highly recyclable (with the highest end-of-life recovery of any metal).

The Tiwai smelter’s long-term future will be reliant on investing in sustainability and diversification, like most producers, to ensure agility to respond to environmental and market challenges and opportunities.

The contract deal with Meridian Energy, Contact Energy and Mercury NZ includes a clause which may require the Tiwai smelter to reduce electricity consumption by almost 50% to ensure security of supply to local businesses and households.

That hastens the importance of smart energy-efficiency measures and the increase of alternative sources of energy such as wind and solar.

Primary aluminium producers will need to be imaginative in navigating the choppy waters with competition from cheap Chinese ingot (still mostly produced with unsustainable coal-fired electricity generation but with China significantly increasing hydro power in the last decade), environmental sustainability and a far greater move towards the use of secondary aluminium (with notable exceptions like aerospace which still insists on high levels of primary ingot) being crucial to that case.

This is about delivering for the country and future generations in a way that also provide a win for the industry.

The MCSI Sustainability Initiative in spring 2024 discovered that a remarkable 62% of listed companies had not fixed decarbonisation targets and estimated that the reduction of C02 emissions by 40% for 2030 will cost nonferrous metals producers between $US450-$US600 per tonne. So, the market and moral imperatives of tackling emissions are critical to the industry.

The aluminium industry has historically benefited from high levels of co-operation and this will be crucial to rising to these challenges.

Equally important will be the government ensuring that it takes a long term view of investing in the future of New Zealand manufacturing, including aluminium production which also earns important export dollars (with around 90% of the ingot produced at Tiwai exported). A thriving modern economy requires that diversification.

That’s vital not just for Otago and the South Island but the country as a whole to ensure national economic resilience and to promote sustainability.

Andrew Perchard is honorary research professor at Otago Business School at University of Otago. He is the author of Aluminiumville: Government, Global Business and the Scottish Highlands and advises the global aluminium industry.