In a significant step, Australia’s South32 has announced plans to mothball its Mozal aluminium smelter in Mozambique by March, incurring a $60-million one-off cost, because of failed power negotiations. The deadlock stems from an inability to agree on electricity pricing amid ongoing drought conditions affecting hydroelectricity supply. Australia’s South32 said on Tuesday, 16 December, it will place the Mozal aluminium smelter in Mozambique under care and maintenance by March, incurring a $60-million one-off cost, after the company failed to secure a power deal with the government.
Negotiations between the Perth-based firm and Mozambique’s government and power suppliers have been going on for several years to reach an agreement for the smelter’s energy-intensive operations. “The parties remained deadlocked on an appropriate electricity price, which was exacerbated by ongoing drought conditions affecting electricity supply from HCB,” said South32’s CEO, Graham Kerr, referring to hydroelectricity producer Hidroeléctrica de Cahora Bassa. Under the current power-supply deal, when primary power provider HCB is unable to meet all of Mozal’s electricity requirements, South African utility Eskom will step in.
As the deal is due to expire by March, South32 has not procured raw materials required to sustain operations beyond that period, it said. Producing aluminium is energy-intensive, making affordable power supply a key concern for aluminium producers such as South32. The Mozal smelter, in which South32 holds a 63.7% stake, has been a significant contributor to the company’s aluminium output, accounting for just more than 29% of its total aluminium production in fiscal 2025.
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South32 had flagged a $372-million impairment for the Mozal smelter in its fiscal year 2025 results, reflecting the financial impact of the anticipated shutdown. Its shares ended the day 2% lower, a few minutes before the update was made public.DM Reporting by John Biju in Bengaluru; Editing by Janane Venkatraman and Harikrishnan Nair
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