NZ in ‘great po­si­tion’ in global alu­minium mar­ket

Otago Daily Times - - BUSINESS & MONEY - GAVIN EVANS

AUCK­LAND: Height­ened po­lit­i­cal risk in the global alu­minium mar­ket may play to New Zealand’s ad­van­tage, Rio Tinto ex­ec­u­tive Kel­lie Parker says.

The tar­iffs the US has im­posed on alu­minium im­ports this year, fol­lowed by the sanc­tions it took against Rusal and its se­nior ex­ec­u­tives, had high­lighted sovereign risk in the in­dus­try, she said.

The Ti­wai Point smelter not only had recog­nised tech­ni­cal ca­pa­bil­ity, it also op­er­ated in a sta­ble po­lit­i­cal and reg­u­la­tory en­vi­ron­ment, she said.

‘‘New Zealand is ac­tu­ally in a great po­si­tion to be dif­fer­en­ti­ated in that mar­ket.’’

Ms Parker, chief op­er­at­ing of­fi­cer of Rio Tinto’s alu­minium op­er­a­tions in the Pa­cific, was speak­ing af­ter a func­tion mark­ing the restart of Ti­wai Point’s fourth pot­line af­ter a six­year shut­down.

More than 100 guests from con­tract­ing firms, cus­tomers, gov­ern­ment and part­owner Su­mit­omo Chem­i­cal at­tended. Prime Minister Jacinda Ardern noted about 3% of the site’s pro­duc­tion had been caught by the ‘‘pesky’’ US tar­iff.

Gen­eral man­ager Ste­wart Hamilton said a re­cent visit to Ja­pan high­lighted to him the smelter’s sovereign risk ad­van­tage. Four of the firm’s big­gest cus­tomers there cited low risk, the high pu­rity of its pro­duc­tion and the smelter’s low car­bon foot­print as rea­sons to prefer its prod­uct.

The sanc­tions the Trump Ad­min­is­tra­tion im­posed on Rusal — the world’s sec­ond­largest alu­minium pro­ducer — caused prices to soar to more than $US2600 ($NZ3780) a tonne in April. But Rusal’s sup­ply and joint­ven­ture ar­range­ments with other sup­pli­ers — in­clud­ing Rio Tinto — meant the ban also dis­rupted de­liv­er­ies, force ma­jeure be­ing de­clared on many con­tracts around the world in­volv­ing the Rus­sian busi­ness.

The sanc­tions also added fuel to the fire in alu­mina mar­kets, where prices have been high all year due to pro­duc­tion cuts in Brazil, strikes in Aus­tralia and en­vi­ron­men­tal cur­tail­ment in China.

Alu­mina — re­fined from baux­ite for smelt­ing into alu­minium — was trad­ing at more than $US500 a tonne last month.

But mar­kets were still tough, Mr Hamilton said. The lower New Zealand dol­lar had helped, but alu­mina costs re­mained high and metal prices had also come off in re­cent months.

Alu­minium was sell­ing for $US1966 a tonne on the Lon­don Metal Ex­change mid­week. It fell be­low $US1500 in late 2015 and had been around $US2258 when Rio Tinto an­nounced the restart of line 4 in May.

The New Zealand dol­lar was re­cently buy­ing US69c, down from as much as US88c in July 2014.

Ti­wai Point used to run line 4 op­por­tunis­ti­cally, pay­ing spot power prices when they were at­trac­tive. But the height­ened volatil­ity in metal, power and alu­mina prices in re­cent years — and in the New Zealand dol­lar — now made that too risky.

Hence the four­year, 50MW power sup­ply agree­ment it se­cured with Merid­ian En­ergy.

Mr Hamilton said, rel­a­tive to the rest of the global in­dus­try, Ti­wai Point’s power costs were still high. That meant it had to fo­cus on high­pu­rity, high­value prod­ucts. Much of its out­put went into high­end elec­tron­ics.

Mr Hamilton said the com­pany was look­ing at a cou­ple of new prod­ucts and in May started pro­duc­ing a new rolling block for car mak­ers in Asia.

Sheet alu­minium for car bod­ies was pre­vi­ously aimed more at high­end car mak­ers but man­u­fac­tur­ers in Ja­pan and South­east Asia were seek­ing it for more main­stream mod­els, he said. The new al­loy could ac­count for 45,000 tonnes a year, he said. The site pro­duced about 337,000 tonnes last year.

Ti­wai Point’s pro­duc­tion is al­ready mar­keted un­der Rio’s two­year­old Re­newAl brand, the first cer­ti­fied low­car­bon alu­minium. Each branded tonne pro­duces less than four tonnes of CO2 — about a third of the in­dus­try av­er­age.

Mr Hamilton said that pro­vided a small pre­mium — about $US34 a tonne — but more im­por­tantly it helped dif­fer­en­ti­ate the firm’s metal in the mar­ket.

Next year the smelter would seek cer­ti­fi­ca­tion un­der the Alu­minium Stew­ard­ship Ini­tia­tive. Gain­ing ASI cer­ti­fi­ca­tion, which cov­ered broader sus­tain­abil­ity mea­sures such as re­gional em­ploy­ment and stake­holder in­volve­ment, was ex­pected to take the first half of next year.

Ms Parker said Re­newAl had helped brand the firm’s low­car­bon pro­duc­tion in the cor­po­rate mar­ket. ASI cer­ti­fi­ca­tion should help do the same in the con­sumer mar­ket. — Busi­ness­Desk


New Zealand could be well­po­si­tioned to cap­i­talise on po­lit­i­cal un­cer­tainty in the global alu­minium mar­ket, Rio Tinto ex­ec­u­tive Kel­lie Parker says.

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