Rio Tinto puts five

Jun 25, 2023

Rio Tinto chief executive Jakob Stausholm says a low carbon solution for the company’s Australian aluminium assets must be found before 2030, and insists while the fix is not within reach, he is committed to working with governments to find one.

Mr Stausholm’s declaration that Rio’s Australian aluminium assets “cannot continue like this” came after the division’s underlying earnings crashed 82 per cent over the past year, and as Mr Stausholm said he hoped to convince China’s biggest steelmaker to make green steel products in Australia.

Rio Tinto CEO Jakob Stausholm with Chanticleer columnist James Thomson. LUIS ENRIQUE ASCUI

Mr Stausholm will notch three years as Rio chief in December and has built Rio’s modern corporate strategy around decarbonisation, by pushing the miner into battery minerals such as lithium and graphite, and by vowing to halve the company’s emissions by 2030.

Almost half of Rio’s emissions are generated by the Pacific Aluminium division, which includes fossil fuel-powered aluminium smelters in NSW and Queensland, as well as two fossil fuel-powered alumina refineries near Gladstone.

Mr Stausholm has eschewed his predecessor’s warning that the assets were “on thin ice”, but said on Tuesday that there was a limit to his patience.

“The deadline is very simple, our power contracts run out in 2028 and 2029,” he said, referring to the contracts that serve the Tomago and Boyne smelters in NSW and Queensland respectively.

“I think it’s 48 per cent of our Scope 1 and Scope 2 [greenhouse gas emissions] stem from these relatively few assets in our portfolio and that is also why we are saying we cannot continue like this, it has to change.”

Rio’s most lucrative aluminium smelters are in Canada, where it has vast hydroelectricity assets that provide the energy-hungry smelters with cheap, clean power at any time of day or night.

The Queensland government is studying ways to operate pumped hydro power – where water is pumped uphill when power prices are low then dropped through turbines to create power when prices are high – in the Great Dividing Range and committed funding in this year’s state budget toward a $14 billion hydro project at Borumba.

Mr Stausholm said the precise clean energy solution for Rio’s Australian assets was not yet known, but the scale of renewable energy required by Rio’s aluminium and mining assets was vast and could not be implemented quickly.

“For companies like Rio Tinto it is fairly large scale in order to make a difference on renewable energy and that means a lot of land, and it is not trivial to go through not just permitting but also work, very often, with traditional owners, and we can’t cut corners there,” he said on the sidelines of the Melbourne Mining Club.

“Here in Australia it is much more difficult to have a green firming of renewables. You can do it with things like pumped hydro for example.

“Right now we have to negotiate in order to find a solution after that time. But I would love to see that we could future-proof it, not just very much for our staff, but I also think it is in the interests of Australia.

“[Pacific Aluminium] are probably the biggest manufacturing assets that exist in Australia, and it is very important for Gladstone and it’s important for exports.”

Rio fully impaired the book value of the Boyne smelter in February and announced more than $1 billion of further impairments last week against the book value of the two alumina refineries that serve Boyne.

Rio said the Albanese government’s carbon policy was the trigger for last week’s impairments, but Mr Stausholm has stressed he supports the policy and is happy with the level of consultation Rio received.

The aluminium division occupies a large chunk of Rio’s government relations work in Australia, though 90 per cent of the company’s underlying earnings over the past six months came from Western Australian iron ore.

The iron ore division has bounced back to form over the past six months, shipping its largest volumes in five years. The strong iron ore volumes have coincided with weak steel demand in China, which has forced Chinese steelmakers to export large volumes of steel to other markets this year.

Rio’s market analysis team, led by Vivek Tulpule, has for most of the past decade predicted that Chinese steel production would peak at just over 1 billion tonnes some time between 2020 and 2025 before starting to decline.

Those predictions have proved prescient so far, with China producing just over 1 billion tonnes of steel in each of 2020, 2021 and 2022.

Mr Stausholm said the Chinese steel industry had probably peaked, but he said growth in steel production in other parts of Asia would likely offset any reduction in China.

“Over time it is bound to happen. For me that is not so important, I am more interested in the global development of steel production.”

Mr Stausholm said he hoped to convince China’s biggest steelmaker, Baowu, to work on new iron ore products in Australia that could help reduce the carbon footprint of the steelmaking process.

“What I have been talking to Baowu about is, could we do more processing in Australia, such as the reduction to green briquettes for example,” he said.

“This is not a project for tomorrow but a bit further out.”

Follow the topics, people and companies that matter to you.

Fetching latest articles