SOUTH32 does not see a way back for its Mozal aluminium smelter which is expected to close in March, sources familiar with the company’s thinking say.
This is despite reports the facility’s energy suppliers in Mozambique and South Africa are hoping to deliver an eleventh hour solution on electricity tariffs.
Mozambique’s government was doing “everything that is required” to make sure that South32’s Mozal aluminium smelter stays open, mineral resources and energy minister Estevao Pale told Reuters on Monday.
On January 23, Dan Marokane, CEO of South African power utility Eskom, was quoted as saying the company was “… trying to find a solution [that] will yield something”. He added that: “The conversation is still on the table.”
That is not the way South32 sees the situation after opening talks on an electricity tariff about six years ago, and in the last 12 months convening urgent talks with Hidroeléctrica de Cahora Bassa (HCB) and Eskom ahead of the current contract ending in March.
Mozal was one of South32’s jewels because it was able to produce “green”, low-cost aluminium, supplied by electricity from HCB’s Cahora Bassa hydroelectric power plant.
However, the dam is only producing at about one-fifth of its former capacity owing to drought. Most of Mozal’s power – about 940 MW, consumed 24/7 – was supplied by Eskom which is produces electricity from relatively expensive coal-fired power stations.
The goal of South32’s recent discussions was to be able to draw on Eskom for affordable power for a couple of years until Cahora Bassa is able to get back to full capacity. That has proved unsuccessful, partly as Eskom has little wriggle room for negotiation. Its tariffs have increased by 900% since 2008, according to the Minerals Council South Africa.
The closure of Mozal will see some 5,000 direct jobs lost in Mozambique. Up to 22,000 jobs will be affected including contractors to Mozal which accounts for 3% of the country’s GDP.
