Trafigura casts doubt over the future of zinc and lead smelters in Australia

The future of ‘uneconomical’ smelters in Hobart and Port Pirie are under review by Nyrstar’s Singapore-based parent company, which says there are ‘no sacred cows’.

Nyrstar’s zinc works at Lutana in Tasmania’s capital, Hobart.

Global commodities company Trafigura says 1300 jobs are in jeopardy as it seeks government support to keep open zinc and lead smelters in Australia.

Trafigura has launched a strategic review of its smelters at Hobart and at Port Pirie in South Australia.

The two smelters, both more than 100 years old, are teetering even as the federal government promotes its Future Made in Australia policy in the countdown to the federal election.

Trafigura chief executive Richard Holtum said there were “no sacred cows” as the Singapore-based multinational assessed the future of the struggling smelters.

Mr Holtum, who took the reins at Trafigura in January, said there was a case of some form of government ownership of the Nyrstar business that includes the two smelters.

“In today’s fractured, multipolar world, I would argue that uncompetitive assets … such as Nyrstar Australia, shouldn’t be in fully private hands,” he said at the Financial Times Commodities Global Summit in Lausanne, Switzerland.

“Critical infrastructure and smelting capacity is a national security issue and therefore needs to probably have some sort of government ownership or significant government support for it, because it is not competitive on an international basis comparing it to the Chinese smelters.

“There are no sacred cows here. What we’re looking at is every single asset that we own, we’re doing a strategic review of some of our struggling assets – Nyrstar Australia being a particular one.”

Nyrstar has written down the value of the two smelters by more than $US500m ($794m) over the past two years. The zinc smelter at Hobart and the multi-metals recovery plant at Port Pirie are accounted for as a single business unit due to the integration of their operations.

Mr Holtum said the smelters were uneconomical, as were others in Western nations, in the face of competition from China.

The Nyrstar smelter at Port Pirie in South Australia’s Upper Spencer Gulf region. Picture: AAP

“If I was Australia, I would be very hesitant about this smelting capacity shutting down,” he said.

Glencore chief executive Gary Nagle last month said high power costs were a major threat to the Mt Isa Mines copper smelter and refinery, while BHP shut down Australia’s only nickel smelter last year.

It is understood Trafigura has been in talks with the federal government about the future of the Nyrstar assets. Trafigura took on ownership of the smelters in 2019.

Industry minister Ed Husic was contacted for comment.

Mr Holtum’s warning about the Hobart and Port Pirie operations came hot on the heels of The Australian revealing Trafigura had scrapped plans for a $750m green hydrogen plant in South ­Australia.

Trafigura had intended to build the world’s largest hydrogen electrolyser ­facility at Port Pirie as part of an ambitious plan that included funding from the SA government.

The Hobart zinc smelter is one of the world’s biggest with capacity to produce 280,000 tonnes a year but is 108 years old and in need of upgrades.

Trafigura put a $400m upgrade on hold last August, blaming deteriorating global economic conditions and a $100m blowout in construction costs.

The work received bipartisan support before last federal election with both Labor and the Coalition agreeing to provide $50m in funding toward a new electrolysis plant. The Tasmanian government committed $20m to the project.

Those grants had not been drawn down when Trafigura put the project on hold.

Trafigura had touted the new electrolysis plant as central to securing the long-term future of 1300 jobs in Hobart and at the interlinked operations in Port Pirie.

Mr Holtum revealed the strategic review just a fortnight after Trafigura announced it would slash zinc production at Hobart by about 25 per cent from April until further notice.

Nyrstar said the decision to cut production followed an extensive review and was a direct response to deteriorating market conditions and financial losses.

“Nyrstar Australia plays an important role in maximising the value of Australian metals and minerals. We remain optimistic about the future and have the flexibility to lift production levels when operating conditions improve” Nyrstar Hobart general manager Todd Milne said at the time.

The Hobart operations have been hit by worsening conditions in raw material markets, increased cost and competition from more modern, low-cost smelters in China.

Originally published as Trafigura casts doubt over the future of zinc and lead smelters in Australia