Aussie aluminium next on chopping block, Rio warns

Marion Rae |

Rio Tinto has reported a nine per cent drop in underlying earnings of $US23.9 billion.
Rio Tinto has reported a nine per cent drop in underlying earnings of $US23.9 billion.

Anglo-Australian resources giant Rio Tinto says the future of the Australian aluminium industry rests with federal and state governments which must provide competitively priced and reliable power.

As the west’s largest producer of aluminium, and aiming to halve company emissions by 2030, Rio Tinto has secured solar and wind offtake agreements to potentially re-power its coal-dependent smelter and refineries in Gladstone.

“But ultimately the next step has to come from the Queensland government and the commonwealth – namely to offer Rio Tinto competitively priced firming power,” chief executive Jakob Stausholm told analysts in London on Wednesday.

“And if we can’t get that to work, then we don’t have a long-term solution for our Pacific aluminium business,” he said.

Mr Stausholm said they were “super-focused” on wanting to protect the Australian operations but it is an export business that competes with aluminium from Canada, the Middle East and elsewhere. 

As peer BHP considers mothballing nickel smelting and refining in Western Australia, Rio Tinto has sounded a warning about the future of manufacturing.

The Rio boss said the Gladstone facilities are arguably the biggest manufacturing assets remaining in Australia and the government should be interested in finding a viable pathway that includes big batteries, fast-start gas and transmission infrastructure.

“What I’m focused on is how can I get competitively priced firm power with the lowest possible carbon footprint,” he said.

Rio Tinto reported a fall in profit for the 12 months to December 31 amid weaker commodity prices that took a $US1.5 billion bite out of the company’s results.

The world’s biggest iron ore producer achieved the second-highest shipment year in the Pilbara but suffered lower prices overall as global supply improved and outpaced “modest” demand growth.

Robust steel production was absorbing record iron ore imports by China and higher global iron ore prices at the end of 2023 were expected to show up in 2024 results, Rio Tinto said.

Underlying earnings for the year to December 31 were $US23.9 billion ($A36.4 billion), down nine per cent, and net cash from operating activities was $US15.2 billion ($A23.2 billion), a six per cent fall.

Open cut iron ore mine
The drop in profit came despite firmer iron ore prices in late 2023. (Alan Porritt/AAP PHOTOS)

Net earnings were $US10.1 billion ($A15.3 billion) after a $US700 million ($A1.1 billion) impairment charge mainly relating to Australian alumina refineries.

Rio Tinto also released its annual climate report and warned Australia’s national targets were not in line with limiting global warming to 1.5 degrees.

“We continue to believe electrification is the most efficient and cost-effective way to eliminate our diesel emissions,” Mr Stausholm said.

“But we are not expecting large-scale deployment of electric fleets to our operations before 2030.”

Decarbonisation investment will drop to $US5 billion to US$US6 billion ($A7.6 billion – $A9.1 billion) for 2022 to 2030 – down from an original forecast of $US7.5 billion ($A11.4 billion).

Some $US1.5 billion ($A2.3 billion) of that will be invested by 2026, with $US750 million ($A1.1 billion) to be spent in 2024 including offsets.

The low-carbon transition continues to be at the heart of the company’s strategy, and Rio was already getting a premium for low-carbon products but it should be bigger, Mr Stausholm said.

Net debt was stable and overall capital investment guidance was unchanged at up to $US10 billion ($A15.2 billion) per year in 2024, 2025 and 2026.

Rio Tinto said it expected to pay about $US1 billion ($A1.5 billion) per year on closure activities at the Gove alumina refinery, Argyle diamond mine, Kakadu uranium mine and other legacy sites.

Copper unit costs were expected to fall in 2024, driven by higher volumes at Oyu Tolgoi in Mongolia and at Kennecott in Utah where refined copper volumes are expected to increase with the smelter rebuilt.

The company declared a higher fully franked final dividend of $A3.93 for a total of $A6.54 in 2023, after slashing dividends a year ago as weak demand in China hit profits.