Tiwai Point Aluminium Smelter

In 1955, a geologist working for Consolidated Zinc Proprietary Ltd (ConZinc) identified a commercial deposit of bauxite in Australia on the west coast of Cape York Peninsula. The company investigated sources of large quantities of cheap electricity needed to reduce the alumina recovered from the bauxite into aluminium. In 1960, ConZinc reached an agreement with the government for it to build a smelter and power station using the hydroelectric capacity of Lake Manapouri and Lake Te Anau. In 1963, ConZinc decided not to build the power station, and following that decision the government decided to construct it, with power first being generated in 1969. Construction of the Manapouri Power Station attracted controversy for its environmental effects, with over 264,000 New Zealanders signing the Save Manapouri petition. With a supply of electricity to be available, ConZinc built the Tiwai Point smelter, opening in 1971.[2] The original ownership was 50% Comalco, 25% Sumitomo Chemical Company and 25% Showa Denko KK.[14]

Tiwai Point is the only aluminium smelter in New Zealand. In December 1980, the government announced a project that would build a second smelter at Aramoana, but opposition from the public, changes in the aluminium market, and the loss of a commercial partner meant the project did not go ahead.[2]

The smelter uses the Hall–Héroult process to convert alumina (aluminium oxide) to elemental aluminium. Bauxite is mined in Australia and refined into alumina before being shipped to New Zealand.[15] The smelter consists of three lines of P69 technology cells, with 208 cells each (i.e. 624 total), and one line of 48 CD200 technology cells. The third P69 Line was built in the early 1980s as part of the Muldoon government's "Think Big" projects.

The smelter produces the world's purest aluminium[2] – 99.98 percent pure[16] – and is one of two smelters in the world producing ultrahigh purity aluminium.[17] In 2011 the smelter produced 354,030 saleable tonnes of aluminium, which was its highest ever output at the time.[18] In 2015, it produced 335,290 tonnes.[19]

Taken from the Statistical Review of Comalco's New Zealand Activities, page 22 of the 1993 Annual Report.

Year   Tonnes   Aluminium Price  Net Profit    Employees
1979  153,537    1575             -1,172,000     1,252  
1980  154,740    1770             17,470,000     1,258  
1981  153,979    1302              2,941,000     1,359  
1982  163,419    1026            -20,698,000     1,452  
1983  218,609    1478             -9,665,000     1,651  
1984  242,850    1281              1,766,000     1,631  
1985  240,835    1072            -24,772,000     1,529  
1986  236,332    1160            -18,188,000     1,506  
1987  248,365    1496             92,570,000     1,429  
1988  257,006    2367            173,040,000     1,770  
1989  258,359    1915            118,500,000     1,820  
1990  259,408    1635             42,051,000     1,720  
1991  258,790    1333            -34,122,000     1,465  
1992  241,775    1279            -18,649,000     1,415  
1993  267,200    1161            -18,016,000     1,465  

The smelter production is in tonnes of saleable metal, the aluminium price is the average London Metal Exchange 3 month in US$/tonne, the Nett Profit/Loss is after tax and NZ$. The employee count includes contract employees and the full-time equivalent of part-time employees. Comalco-CHH Aluminium employees are not included from 1990; 425 were employed in 1993.

The smelter's power demand from the national grid is about 570 MW. Most of the energy for the smelter is supplied from the Manapouri hydroelectric power station, via two double circuit 220 kV transmission lines. The facility is the largest electricity consumer in New Zealand, and uses approximately one third of the total electricity consumed in the South Island and 13% of the total electricity nationwide, equivalent to about 680,000 households.[5]

Electricity usage since 1970

Electricity usage since 2000

New Zealand Aluminium Smelters has a contract for electricity supply with Meridian Energy for the continuous supply of 572 megawatts for the period 2013 to 2030.[20] A variation of this agreement was signed in 2015.[5]

Aluminium smelting via the Hall–Héroult process produces carbon dioxide as a by-product. The basic reaction is Al₂O₃ → 2Al + 3"O". Oxygen equivalents react at the red-hot carbon anode, forming a mixture of carbon monoxide (that subsequently becomes carbon dioxide) and carbon dioxide. For one tonne of aluminium, 1.55 tonnes of CO result, becoming 2.4 tonnes of CO₂. However, if all the oxygen were instead directly converted to CO₂, then only 1.56 tonnes of CO₂ would result. At the stated rate of 1.97 tonnes of carbon dioxide per tonne of aluminium, the production of 272,000 tonnes of aluminium in a year would emit 535,000 tonnes of carbon dioxide. In 2007, Tom Campbell, the chief executive of majority owner Rio Tinto Aluminium NZ, said that the smelter was among the top 5% of the world's 250 aluminium smelters in terms of low emissions.[20] Metal produced by Tiwai Point is marketed under the RenewAl brand, which according to NZAS guarantees that less than four tonnes of CO₂ is emitted for every tonne of aluminium produced.[21]

NZAS reports that the facility employs 800 full-time employees and contractors and indirectly creates jobs for 3,000 people.[19] The smelter is reported to account for 10 percent of the Southland region's economy.[7]

Tiwai Point has frequently operated at a loss, such as in 2012 when it lost $548 million.[22] Analysts have commented that the profitability of the smelter is most dependent on prices for electricity, alumina and the finished aluminium as well as the New Zealand dollar.[6][23] Between 2008 and 2013, aluminium prices fell by more than 30 percent.[24] Rio Tinto threatened to close the Tiwai Point smelter if it could not get a cheaper deal for electricity from retailer Meridian, or the Government failed to give it a substantial subsidy to cover losses.[25]

In 2013, Rio Tinto threatened to shut down the loss-making Tiwai Point smelter, unless it was able to continue re-negotiating favourable electricity prices with Meridian Energy.[26] Meridian is one of several state-owned enterprises which was proposed for a partial float on the sharemarket by the John Key National Government. The government wanted to get the maximum possible sale price, which would potentially conflict with Rio Tinto's desire for low electricity prices. As a result, the Government announced it would subsidise Rio Tinto to keep the Tiwai Point smelter operating in the short term,[27][28] garnering criticism from business commentators and opposition politicians.[29] However, on 2 April 2013, John Key said Rio Tinto had rejected the Government's offer, preferring a "longer-term deal than the Government was prepared to offer".[30][31] John Key stated that if the smelter can't sustain itself financially, the government wasn't interested in keeping it open long-term.[32]

Much media commentary[33] in April 2013 focused on the impact of closure on both domestic power prices and share prices when the State Owned Enterprise and electricity generator Mighty River Power would be partially sold off to private investors. NZAS produced a report which claimed that if the smelter closed, there would be a permanent loss to Southland's GDP of about 7-8 percent and that 2-3 percent of Southland's population could move out of the region.[16] Invercargill mayor Tim Shadbolt said it was a myth that closing the smelter would result in lower prices, and vowed to keep it open.[34]

In August 2013, the New Zealand government agreed to make a $30 million payment to NZAS as a deal to support the smelter and to save jobs, exchange for agreeing the smelter cannot be closed before January 2017.[35] Finance Minister Bill English said the Government would make no further contribution to support it,[35] which he reiterated in 2015 following speculation that Rio Tinto was seeking to sell the smelter.[22]

In 2016, an analyst First New Zealand Capital (FCNZ) utilities said that the smelter was thought to be breaking even, and that favourable currency rates and low alumina prices were helping matters.[6]

In October 2019, Rio Tinto announced that it was undertaking a strategic review of the Tiwai Point Aluminium Smelter, including a wide range of issues associated with closure. The NZAS chief executive Stew Hamilton said that they had been losing money for the last 12 months, and that options ranged from operating at the status quo, which would require cheaper power, to closure of the plant. [36]

During New Zealand's lockdown for the Covid-19 pandemic, the smelter was deemed an essential service and exempt from restrictions.[37]

On 31 March 2020, Rio Tinto announced that it would close potline four, to ensure it can cope with the restrictions at the plant that are needed because of the coronavirus pandemic. Potline 4 originally opened in 1996 but was turned off for six years between 2012 and 2018 before reopening as a result of an uptick in aluminium prices and a new deal with power supplier Meridian. Potline four is smaller than the smelter's other three potlines, producing about 31,000 tonnes of aluminium a year, or about 9 per cent of the smelter's total output, and consumes about 50 MW of electricity.[38]

• New Zealand Aluminium Smelters Limited