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Rio Tinto to slash aluminum output at Boyne on soaring power costs

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Rio Tinto to slash aluminum output at Boyne on soaring power costs

Boyne Smelters Ltd. will curtail about 8% aluminum output at its Boyne Island aluminum smelter in Queensland, Australia, due to a threefold increase in electricity prices in the state compared to the 2016 average, it said Jan. 19.

This curtailment will result in the potential loss of 45,000 tonnes of aluminum production in 2017. This production is worth about A$110 million at current prices, according to The Australian, which also said up to 30 jobs are at risk due to the move.

About 85% of the smelter's electricity requirements are met through a long-term contract with Gladstone Power Station while the remaining 15% is supplied via the spot market, where prices elevated to A$12,000 to A$14,000 per MWh over the weekend from an average of A$66.80 per MWh a week earlier.

Boyne Smelters general manager Joe Rea said the company is paying over 500 times more than what it costs to generate electricity. According to him, this would be the second time in three years that the company has to cut production on large scale due to "uncompetitive electricity prices."

"The decision to curtail production is a very difficult one. It takes months, not weeks, to bring the smelter back to a stable full capacity, and that can only happen if and when power prices become competitive," Rea added.

He said the company will announce the extent of the impact on the workforce in the coming weeks.

The operation employs about 1,000 people.

Global mining giant Rio Tinto owns a 59.39% stake in Boyne Smelters.