$75m profit for smelter
The New Zealand Aluminium Smelter (NZAS) has cashed in on rising international metal prices, reporting a strong profit for the 2017 year.
Pacific Aluminium (New Zealand) Limited (PacAl NZ) reported its financial results relating to its interest in NZAS yesterday, announcing a $75 million profit for 2017.
This was an increase of $50m on the 2016 figures.
Metal prices were almost 23 per cent higher on average in 2017 than in 2016, which more than offset the effect of large increases in major raw material prices through 2017.
Outgoing NZAS chief executive and general manager Gretta Stephens said while the result was pleasing, there was no guarantee market conditions would remain high.
‘‘Predictions are for aluminium market conditions in 2018 to be volatile and NZAS remains vulnerable to that market volatility as well as movements in the New Zealand dollar against the US dollar.
‘‘This is because we continue to pay one of the highest prices for delivered power for a smelter anywhere in the world.
‘‘In 2017 our transmission costs, at $72m for the calendar year, were just $3m shy of our underlying profit.’’
While profits were up in 2017, overall production was static.
The smelter produced 337,016 tonnes of metal, down 0.5 per cent on the 2016 figures.
Earlier in May, NZAS announced the restart of its quarter potline Line 4, which was closed in 2012 due to unprofitability and high electricity prices. The restart got the go-ahead following a fixed-term power agreement signed with Meridian.
The contract, underwritten by Meridian and supported by contracts with Contact Energy, Genesis Energy and Mercury, runs until December 2022.
It is likely to take up to six months to get Line 4 fully operational, eventually boosting NZAS’ daily overall production of aluminium by nine per cent.
Stephens said an unintended conse- quence of the restart would be a $6m per year increase in transmission costs ‘‘despite there being no change in the transmission infrastructure the smelter uses’’. ‘‘We believe businesses should pay a fair price for the transmission services they receive, this is not what is happening under the current system.’’
NZAS external relations director Jen Nolan said they did not know what direction the Electricity Authority would be taking to reform transmission pricing, before the Authority takes its next steps before the end of June.
‘‘Market conditions can change quickly and NZAS would be more resilient if its power was more competitively priced.’’
The current model, which is under review by the Electricity Authority, has proved unpopular throughout Southland.