Smelter earnings down $2m

International aluminium prices have been dropping.

The Tiwai Point aluminium smelter made an underlying profit after tax of $54 million in the year to December 31, just $2million less than the previous year's profit, although only $4million of that was made in the second half of the financial year.

Rio Tinto-controlled NZ Aluminium Smelters will decide by the end of July whether to sign a new electricity contract for 172 Megawatts of its total 572MW load at a new, higher price and warned yesterday that the smelter is facing even tougher conditions in 2016 than it did last year.

The international benchmark price of aluminium averaged US$1661 a tonne in 2015, down 12 per cent on 2014, and was quoted on the London Metals Exchange yesterday at US$1550 a tonne.

Still, the reduced metal price was "offset by higher premiums and a weaker New Zealand dollar" which contributed to a $34 million improvement in metal revenues. Total production of 335,291 tonnes was 2.1per cent higher than the previous year.

"Higher volumes, improved energy efficiency and reduced anode consumption has helped to offset the increased cost pressure in 2015 from weaker exchange rate and higher maintenance spend," the company said in notes to its statutory accounts.

If the smelter were to reduce its electricity demand to 400MW, industry-watchers expect it would close down one of its four aluminium production pot-lines.

While the smelter would be the single largest beneficiary among industrial electricity users of proposed changes to national grid costs, NZAS argues it still faces "one of the highest power and transmission prices of any smelter in the world outside China, making it harder to compete in the highly competitive aluminium market."

NZAS was to have decided before now whether to take up its 172MW tranche of electricity at a higher price than was negotiated in 2013, when the smelter played hardball with Meridian Energy for a cut to its power prices.

- BusinessDesk