What's Happening?
South32, a diversified natural resources group, is considering placing the Mozal aluminium smelter on care and maintenance due to challenges in securing sufficient and affordable electricity. The company has been negotiating with Mozambique's government, hydropower producer Hidroeléctrica de Cahora Bassa, and South Africa's Eskom to secure electricity supply beyond March 2026, when the current agreement expires. South32 holds a 63.7% stake in Mozal and has decided to limit investment in the smelter, stop pot relining, and stand down associated contractors. The company has completed a carrying value assessment of Mozal, resulting in a $372 million impairment for the 2025 financial year, reducing Mozal's carrying value to $68 million.
Why It's Important?
The potential closure of the Mozal smelter highlights the challenges faced by industries reliant on stable and affordable electricity supply. The impairment and investment limitations reflect the uncertainty surrounding future electricity agreements, impacting Mozal's competitiveness and economic contributions to Mozambique. The situation underscores the importance of reliable energy infrastructure for industrial operations and the broader economic implications of energy supply disruptions.
What's Next?
South32 is hopeful for a workable solution that enables Mozal to operate beyond March 2026, maintaining its substantial contribution to Mozambique. The company will support its employees through the process and continue negotiations to secure a viable electricity supply agreement. The outcome of these negotiations will determine Mozal's future operations and its role in Mozambique's economy.
Beyond the Headlines
The Mozal smelter's situation raises broader questions about energy security and industrial competitiveness in regions with fluctuating power supply. It highlights the need for strategic planning and investment in energy infrastructure to support industrial growth and economic stability.