Nothing should be left on table to keep Rio Tinto's aluminum smelter open, says Australian minister

Australian Minister for Climate Change and Energy Chris Bowen has said "nothing should be left on the table" to find a solution to keep Rio Tinto Group's Tomago aluminum smelter open after 2028.

Rio Tinto's unit Tomago Aluminium Co. Pty. Ltd. announced Oct. 28 that it had "started a consultation process with employees on the potential future of its operations."

Tomago Aluminium has "undertaken a comprehensive market-sounding process" since 2022 to "identify an economically viable energy solution for when its existing electricity supply contract expires."

The company said the cost of both coal-fired and renewable energy options from January 2029 would rise significantly, "fundamentally changing operating economics and leaving the smelter unviable."

Further, Tomago Aluminium is "yet to identify a pathway that supports commercially sustainable operations" beyond 2028.

Bowen told Australia's ABC Radio National on Oct. 29 that Tomago Aluminium's announcement that it would be consulting with its workers about their future was "deeply concerning."

Bowen also said he found hope in the company saying that it has not made a final decision.

"That means nothing should be left on the table to see if there is a sensible arrangement that can be reached," Bowen said.

Tomago Aluminium CEO Jérôme Dozol said in the Oct. 28 statement that "there is significant uncertainty about when renewable projects will be available at the scale we need."

Bowen said, "They're not saying they need less renewables, they're saying they need more renewables. We agree with that... but that doesn't solve the immediate challenge today and tomorrow and next month of the discussions with Tomago."

Australia's energy transition whereby the country is looking to increase renewable energy penetration is "not inevitable or easy or straightforward, but we are making good progress," Bowen said.

Further, the Tomago smelter is over 40 years old and is therefore "not cutting-edge international technology," Bowen said.

While reluctant to "start pointing fingers and saying they should have done this or should have done that... we fully acknowledge energy prices are a huge issue," given electricity accounts for 40% of Tomago Aluminium's current operating costs, Bowen added.

Rio Tinto did not immediately respond to a request for comment.

Inflection point

In an Oct. 28 LinkedIn post, Marghanita Johnson, CEO of the Australian Aluminium Council (AAC), responded to Tomago Aluminium's same-day announcement by saying that "Australia has relied on commercial cost structures and market-driven investment, leaving its producers exposed on an uneven playing field."

"It is now clear that market forces alone are not enough to sustain this sector in the face of state-backed competition. The aluminum industry is no longer competing against foreign companies but against foreign governments writing the rules to their own advantage," Johnson said.

Further, the AAC warned in an Oct. 24 report that Australia's aluminum industry "faces an inflection point."

"Without a policy response, Australia risks losing not just market share -- but the aluminum industry itself" as "global overcapacity, subsidized competition and rising domestic energy costs are continuing to erode production, investment and employment," AAC's report said.

Australia's integrated aluminum value chain should be treated as a "priority national industry, deserving of targeted support that reflects both its economic importance and its role in the energy transition," the report said.

Aluminum production from countries in the Organisation for Economic Co-operation and Development has fallen by 27% since 2000, as US and European smelters have closed. Meanwhile, China's output has risen by 1,400% over this period, "making it the dominant global player."

Other competition has arisen from the "Gulf States," which now produce almost 10% of global supply despite only starting large‑scale production 15 years ago, according to the AAC report.

Indonesia is also joining this race, "using its significant mineral reserves and cheap state‑backed coal power to rapidly expand alumina refining and move into aluminum smelting," AAC's report said.

"The Platts-assessed Australia FOB alumina benchmark price has remained under pressure from oversupply and fell to $315/mt on Oct. 21, its lowest in three years" as new capacity in Indonesia and the current surplus in China weigh on the market, S&P Global Energy Metals and Mining Research team analysts said in an Oct. 23 note.

The benchmark from Platts, part of Energy, was at $318/mt on Oct. 28, down from $712/mt a year prior.