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Commodities

Rio Tinto to shutter aluminum smelter in New Zealand

High power costs and weak demand from auto industry sink operations

Aluminum prices are down due to weak demand from the auto sector.   © Reuters

SYDNEY -- Rio Tinto will shut down its money-losing aluminum smelting operations in New Zealand by August 2021, after failing to negotiate a new electricity contract that could allow the business to be competitive, the company said Thursday.

The smelter is "not economically viable due to energy costs that are some of the highest in the industry globally, coupled with a challenging short to medium term aluminum outlook," the Anglo-Australian miner said in a statement.

Rio Tinto owns 79% of the venture, with Japan's Sumitomo Chemical holding the rest. The business employs about 1,000 people.

Rio Tinto had said last October it would conduct a "strategic review" of the operations, which lost 46 million New Zealand dollars ($30.2 million) in 2019. It held talks with the New Zealand government and power provider Meridian Energy.

"It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making [the smelter] a financially viable business," said Alf Barrios, head of the company's aluminum operations.

The price of aluminum on the London Metal Exchange averaged 15% lower in 2019 than in 2018, according to the company. This owed partly to a demand slump in the auto industry, a major consumer of the metal.

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