Australia's largest aluminium smelter, Tomago Aluminium, is consulting with its employees regarding the future of its operations due to escalating energy costs. The smelter, located north of Newcastle, produces nearly 40% of the country's annual aluminium output and employs over 1,000 workers. In a statement released today, Tomago Aluminium indicated that it has not yet found a viable path to sustain operations beyond the expiration of its energy contract in 2028.

The company highlighted that finding competitively priced energy remains a significant challenge. Tomago Aluminium is the largest single user of electricity in Australia, with energy costs accounting for more than 40% of its operating expenses. The company warned that the anticipated increase in costs for both coal-fired and renewable energy options starting in 2029 would make the smelter economically unfeasible.

Rio Tinto, the majority owner of Tomago, has been in discussions with state and federal governments for several months, seeking interventions to prevent the smelter's closure. The company has also been engaged in a market-sounding process since 2022 to explore potential solutions. However, Tomago's CEO, Jérôme Dozol, stated that none of the proposals received thus far would allow the smelter to remain operational. "Unfortunately, all market proposals received so far show future energy prices are not commercially viable, and there is significant uncertainty about when renewable projects will be available at the scale we need," Dozol said.

The consultation process with employees is ongoing, and no final decision has been made regarding the smelter's future. Australian Manufacturing Workers' Union NSW Secretary Brad Pidgeon expressed concern over the situation, stating that the announcement is a setback for the manufacturing sector. "It's very disappointing for the workers and community by and large, but I think it really validates the sad news that's going to occur moving into the future," he said.

Pidgeon noted that the union has been in discussions with Tomago for the past year, but no definitive decisions have been communicated to the workers. He emphasized the need for government and company collaboration to support workers amid this uncertainty. "The pressure of uncertainty really plays on the minds of workers," he added. "We want to see some sort of project fast-tracked to ensure that there are some jobs for workers in the Hunter, but more importantly making sure we have our communities looked after in the process as well."

Dozol reiterated the company's commitment to its workforce, stating, "This is a difficult point to reach. Our focus remains on operating safely and giving our people certainty as soon as possible." As the consultation process continues, the future of Tomago Aluminium remains uncertain, with potential implications for the local economy and the broader manufacturing sector in Australia.