Boyne Smelters Limited (BSL) is the largest aluminium smelter in Australia. Located approximately 20km south of Gladstone at Boyne Island on the Central Queensland coast. Supplied
Boyne Smelters Limited (BSL) is the largest aluminium smelter in Australia. Located approximately 20km south of Gladstone at Boyne Island on the Central Queensland coast. Supplied

BSL exploring options amid ‘tough’ times

BOYNE Smelters Limited is exploring every option to address the tough conditions faced by the aluminium industry.

This week Rio Tinto, which owns BSL, announced it could close the unprofitable New Zealand South Island aluminium smelter, amid high energy costs and falling demand.

Aluminium chief executive Alf Barrios said the short to medium outlook for the industry was challenging, as it launched a review of the smelter, with closure among its options.

"The aluminium industry is currently facing significant headwinds with historically low prices due to an oversupplied market," Rio Tinto aluminium chief executive Alf Barrios said.

"This means that many aluminium providers are reviewing their positions."

Meanwhile, there is concern for the Alcoa-owned Portland Smelter in Victoria, after the US aluminium giant last week flagged asset sales of around $1 billion and a portfolio review.

A Rio Tinto spokesman told The Observer yesterday the company was in discussions with governments and energy providers about potential solutions to the challenges faced by the Australian smelters.

"The entire team at BSL is working very hard to ensure we explore every option to address the pressures faced by the aluminium industry," they said.

"Current market conditions are proving tough for all smelters; however, those with the additional pressure of high energy costs are doing it especially tough.

"At our Australian smelters, we are working with energy suppliers and governments on solutions."

Following the release of Rio's first-half results in August, chief executive Jean Sebastien Jacques said high energy prices and falling demand had created a "very, very challenging situation".

 

Jean-Sebastien Jacques, chief executive officer of Rio Tinto Plc. Photographer: Chris J. Ratcliffe/Bloomberg
Jean-Sebastien Jacques, chief executive officer of Rio Tinto Plc. Photographer: Chris J. Ratcliffe/Bloomberg

 

The results revealed Pacific Aluminium - which Boyne Smelter is part of - suffered a net loss of $US151 million in the 12 months to June 30 and an EBITDA loss of $US57 million.

"We're in discussion with the Federal government and the state governments and our utility providers, depending on which smelter we're talking about, in order to see ways to ensure the long term viability of those assets," Mr Jacques said. "But are we on very thin ice? Yes we are."

Boyne Smelters, which employs about 900 people, receives 810 megawatts a year of power as part of a long-term agreement with state-owned CS Energy and Gldstone Power Station in which it has a 42 per cent stake.

The deal was made in 1994 and is current until 2030.

But it is not immune to challenges from energy costs, with production cuts worth more than $100 million and job losses in early 2017 prompted by high energy prices.

The 2018 annual report shows Boyne Smelter's production has gradually reduced from 583,000 tonnes of aluminium in 2016 to 508,000 in 2017 and 497,000 in 2018.

The company has found ways to reduce exposure to energy prices, including by improving electrical connection to equipment to reduce electrical losses.

A trial which involves reducing the movement of liquid metal in reduction cells is also being completed, with the potential to increase production by 9200 tonnes without the use of additional power.

In August Federal Energy Minister Angus Taylor and Flynn MP Ken O'Dowd visited BSL to discuss energy prices.

Mr O'Dowd told media it was "obvious" the state and federal governments needed to sit down with Rio Tinto to "work out" the issue of high energy costs. Mr Taylor said the government was "absolutely committed" to ensuring manufacturing businesses survive.