Briefing Note | February 2021
Aluminium smelting is an electricity intensive industrial process. Investment in and operation of aluminium smelters is dependent on a reliable, low cost supply of electricity.
Australia’s aluminium smelting industry grew out of the OPEC oil crisis in the 1970s. Australia’s vast and cheap coal reserves (and domestic-only market for east coast gas) meant it was able to supply cheap bulk electricity unaffected by volatility in world oil markets.
Some of the existing fleet of coal fired power stations were built effectively to power aluminium smelters.
At its peak in the early 21st century aluminium consumed around 14 per cent of total electricity production in Australia. Of these six smelters, two have now closed and the smelter at Portland, Victoria has been kept operating only after financial assistance from the Victorian Government.
The decline in Australian aluminium production has been caused by its inability to compete with the rapid scale up of Chinese aluminium production in the 21st century and increasing cost of Australian electricity.
The future of the remaining four Australian smelters depends on their requirement for capital re-investment, electricity supply contracts and global aluminium markets.