A multinational resources company will begin closing its metal operation for good after claiming it would not be worth keeping its doors open.
Rio Tinto plans to wind-down and eventually shut down New Zealand Aluminium Smelters (NZAS) at Tiwai Point, 227km southwest of Dunedin.
The proponent has asked Meridian Energy to cancel its existing power contract, which is due to expire in August 2021, at which point operations are expected to be completely wound down.
2600 jobs in limbo
Up to 1000 direct employees and additional 1600 indirect workers are widely expected be made redundant.
The shock decision came after a strategic review allegedly showed the operation was unviable due to high energy costs and a bleak short-to-medium term outlook for the future of aluminium.
Rio estimates NZAS suffered an underlying loss of NZ$46 million (A$43.3M) in 2019 and revealed no proposed power contract would help the operation return to profitability.
“We recognise the decision to wind-down operations at NZAS will have a significant impact on employees, the community and our customers,” Rio aluminium chief executive Alf Barrios said in a public statement.
“It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financially viable business. We will therefore terminate the power contract and move to close the operation.”
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The Chinese coronavirus previously forced the operation to reduce capacity by 50 megawatts and shut down its fourth line back in March. The decision affected 35 workers who were temporarily redeployed to the other three lines.
“Given the worldwide outbreak of COVID-19 and the four week lockdown in New Zealand, our focus is on supporting our employees in a time of uncertainty and running a safe and efficient operation to meet our obligations with customers and suppliers who are also challenged at this time,” NZAS chief executive and general manager Stewart Hamilton said at the time.