What's Happening?
Australia's South32 has announced plans to place its Mozal aluminum smelter in Mozambique under care and maintenance by March, following unsuccessful negotiations with the government over a power supply
deal. The smelter, which is energy-intensive, relies heavily on affordable electricity to maintain operations. The current power agreement, involving primary supplier Hidroeléctrica de Cahora Bassa (HCB) and backup from South African utility Eskom, is set to expire soon. South32's CEO, Graham Kerr, cited ongoing drought conditions affecting HCB's electricity supply as a contributing factor to the deadlock in negotiations. The company has not secured the necessary raw materials to continue operations beyond the expiration of the current deal, leading to a $60 million one-off cost and a $372 million impairment flagged in its fiscal year 2025 results.
Why It's Important?
The decision to mothball the Mozal smelter highlights the critical role of stable and affordable power supply in the aluminum industry, which is highly energy-dependent. This development could have significant economic implications for Mozambique, where the smelter is a major industrial operation. For South32, the shutdown represents a substantial financial setback, affecting its aluminum production capacity and potentially impacting its market position. The situation underscores the broader challenges faced by industries reliant on consistent energy supplies, particularly in regions where infrastructure and environmental conditions can disrupt power availability.
What's Next?
As South32 prepares to place the smelter under care and maintenance, the company may explore alternative strategies to mitigate the financial impact of the shutdown. This could include seeking new power supply agreements or exploring technological innovations to reduce energy dependency. The Mozambican government and other stakeholders might also engage in discussions to address the underlying issues affecting power supply, potentially involving international partners to stabilize the energy sector. The outcome of these efforts could influence future industrial investments in the region.
