Background: Australia’s Largest Aluminium Smelter under Review
Australia’s largest aluminium smelter, Tomago near Newcastle in New South Wales, is under consideration by owner Rio Tinto for potential closure as its current electricity contract nears expiry. The company disclosed that it is weighing options at the end of its existing electricity supply agreement with AGL Energy, which runs through December 2028. Despite extensive engagement with employees and market stakeholders, Rio Tinto indicated that none of the proposals received to date would sustain commercially viable operations beyond the current contract period.
Why the Viability Question Has Emerged
The core challenge for Tomago lies in energy affordability. Aluminium smelting is an energy-intensive process, and prolonged periods of elevated electricity prices can erode margins and threaten long-term operations. Rio Tinto noted ongoing market pressure from high energy costs and uncertainty about when, or if, renewable projects will deliver the scale of power required to make continued operation financially viable.
Tomago Aluminium’s CEO, Jérôme Dozol, explained that while the company has sought solutions through market proposals and engagement, the energy prices projected for the future do not meet the threshold for sustained profitability. He also highlighted the difficulty of aligning contract timing with the ramp-up and reliability needs of the smelting process, where consistent energy supply is crucial for production stability and cost control.
How the 2028 Contract Shapes the Decision
The expiry of the exclusive electricity supply deal in December 2028 creates a natural inflection point for strategic planning. Rio Tinto has signaled that a decision about continuing operations will depend on whether a viable energy pathway can be secured in the near term and on the developments in the broader energy market, including the availability of renewable generation at the scale necessary to support heavy industrial loads.
Implications for Jobs, Local Economy, and Industry
Tomago’s status as a major employer and economic anchor in the Hunter region means any potential closure would have significant regional consequences. The decision process has included consultations with employees, reflecting a careful approach to workforce impacts and planning. Beyond the immediate labor considerations, the potential shut-down would reverberate through the surrounding supply chain, servicing industries, and Australia’s aluminium supply profile, which has long depended on several large-scale smelters to maintain domestic production and export capability.
What’s Next for Rio Tinto and Tomago
Looking ahead, Rio Tinto will weigh whether new energy arrangements, larger-scale renewables, or other mitigations could render Tomago viable again. If no pathway emerges that aligns with commercial viability, the company may proceed toward closure, subject to regulatory and social considerations. The situation underscores the broader challenges facing energy-intensive manufacturing in Australia, where price volatility, policy shifts, and the pace of renewable deployment intersect to shape industrial decisions.
Broader Context: Energy Costs and Industrial Strategy
Tomago’s case reflects a wider debate about Australia’s industrial strategy, the affordability of electricity for heavy industry, and how to balance decarbonisation with competitiveness. Governments, utilities, and producers are under pressure to foster predictable long-term energy pricing, invest in grid reliability, and accelerate the integration of low-emission power sources without compromising regional employment and export capacity. As Tomago contemplates its future, all stakeholders will be watching closely for any signs that new energy arrangements could restore viability or that a shift in production strategy might be required.
