NZ in ‘great position’ in global aluminium market
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.