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Highlights
- Tomago Smelter's viability at risk beyond 2028 due to high power costs.
- Rio Tinto (ASX:RIO) aims for a decision on the smelter’s future within six months.
- Renewable energy transition faces challenges, impacting long-term sustainability.
The future of Australia’s largest aluminium smelter, Tomago, remains uncertain as Rio Tinto (ASX:RIO) warns that rising power costs could render the facility unviable beyond 2028. The mining giant, which holds a major stake in the smelter, is set to decide on its future within the next six months, as securing affordable and sustainable energy sources continues to be a challenge.
Speaking shortly after Glencore’s (LON:GLEN) CEO raised concerns over high power prices affecting Queensland’s copper smelter, Rio Tinto’s CEO, Jakob Stausholm, emphasized that progress on transitioning Tomago to clean energy has been slower than expected. While efforts to shift the Boyne smelter in Queensland to renewable power are well underway, Tomago faces significant roadblocks.
The Australian government’s vision for strengthening domestic manufacturing and minerals processing has already been challenged by setbacks, including the suspension of lithium hydroxide plant operations, the closure of BHP’s (ASX:BHP) nickel smelter, and the financial difficulties faced by Whyalla Steelworks’ owner. These developments highlight broader concerns regarding energy costs and sustainability in the industrial sector.
Stausholm, who took the helm at Rio Tinto in 2020, has been focused on securing a viable energy future for both Tomago and Boyne. While Boyne has benefited from renewable electricity agreements that support the development of solar and wind farms in Queensland, Tomago’s transition has been far less straightforward.
Tomago’s current electricity contract with AGL (ASX:AGL) is set to expire in December 2028, leaving Rio Tinto with limited time to secure alternative power solutions. Market assessments suggest that achieving 50% renewable energy by 2030 may not be feasible, though a full transition to renewables could be possible by 2035. However, without a clear energy strategy in place, the costs of conventional power are proving to be a major obstacle.
The urgency surrounding Tomago’s fate is compounded by an ongoing industrial dispute, with workers set to stage a six-hour walkout. Additionally, while offshore wind projects have been explored as a potential long-term energy source, progress has been slow. Some companies, such as Oceanex, have proposed offshore wind farms near Newcastle, but several other proponents have withdrawn from the region.
As part of Rio Tinto’s Pacific Aluminium division—alongside Boyne, Bell Bay, and a smelter in New Zealand—Tomago plays a key role in the company’s industrial operations. The division generated $131 million in underlying earnings in 2024, while also being a significant contributor to Rio Tinto’s carbon emissions.
With the clock ticking on Tomago’s power contract, Rio Tinto must soon determine whether a viable energy solution can be secured to sustain operations beyond 2028. Stausholm acknowledged the importance of preserving jobs and keeping the smelter running but stressed that any decision must align with financial sustainability. The coming months will be critical in shaping the future of one of Australia’s key aluminium production sites.
