What's Happening?
South32, an Australian diversified mining company, has announced the transition of its Mozal aluminium smelter in Mozambique to care and maintenance starting March 2026. This decision follows the inability to secure a sufficient and affordable electricity supply, crucial for the smelter's operations. The current power contract, primarily supported by South African utility Eskom, is set to end, and negotiations for a new contract have failed. The closure is expected to impact approximately 4,000 direct jobs and 20,000 indirect jobs, significantly affecting Mozambique's economy, which relies heavily on the smelter.
Why It's Important?
The closure of the Mozal smelter is a major economic blow to Mozambique, representing about 3.9% of the country's GDP. The loss of jobs
will have a profound impact on local communities, where alternative employment opportunities are scarce. For Eskom, the inability to secure a new contract with South32 means finding new buyers for the power previously supplied to the smelter, potentially affecting its earnings. This situation underscores the challenges of energy supply in the region and highlights the broader implications for industrial operations dependent on reliable electricity. The decision also reflects the complexities of international business operations in developing regions.
What's Next?
South32 will incur costs related to maintaining the smelter in care and maintenance, estimated at $5 million annually, and redundancy costs of about $60 million. The company is also considering the long-term implications of potentially restarting operations, which would require significant investment. Meanwhile, the Mozambican government is likely to seek alternative solutions to mitigate the economic impact, possibly exploring new partnerships or energy solutions. Eskom will need to strategize on reallocating its power supply to minimize financial losses. The situation may prompt broader discussions on energy policy and industrial sustainability in the region.
