Rio Starts to Restore Idled N.Z. Aluminum Smelter

By Gavin Evans

Oct. 2 (Bloomberg) -- Rio Tinto Group, the world's second- biggest aluminum producer, started restoring idled capacity at its New Zealand smelter, a process that may take 10 weeks.

The 350,000 metric ton-a-year Tiwai Point operation, 79 percent owned by Rio Tinto Alcan, is restarting 93 smelting cells after rain on New Zealand's South Island restored hydroelectric output and cut power prices, General Manager Paul Hemburrow said.

``We return each cell one at a time and it's quite labor intensive,'' Hemburrow said in a telephone interview from the plant near Invercargill. ``It could be eight to ten weeks'' before full production is reached, he said.

The smelter, which uses almost 15 percent of New Zealand's power, cut production by 11 percent in May as the nation's hydroelectric reserves fell to half their seasonal average and prices soared. Storage, which refers to the amount of usable water in the system, was 4 percent below average yesterday.

Tiwai Point, 21 percent owned by Sumitomo Chemical Co., makes the world's purest aluminum and supplies metal for almost half the hard-drives and capacitors in the world's computers and LCD screens. It gets about 10 percent of its power at spot prices and has lost about 2,900 tons of output a month since May as energy costs surged.

Electricity cost an average NZ$27.64 ($19) a megawatt-hour nationwide yesterday, having reached a record NZ$392.72 June 1.

August Plan

Rio Tinto's plans to resume output in August were thwarted by a continued dry spell on South Island and transmission constraints that restricted power supplies from the North Island. The high- voltage cables liking the two islands will remain at half capacity until an upgrade is completed in 2012.

Government-owned generator Meridian Energy Ltd. supplies the smelter from its nearby 850-megawatt power station on the shores of Lake Manapouri.

The company plans to seek changes to its operating rules early next year that could boost the plant's output by 89 gigawatt-hours a year, enough to supply 11,000 homes, and 1.7 percent more than the plant produced in 2007.

Aluminum for delivery in three months on the London Metal Exchange gained $6 to $2,415 a ton in Asian trading today. The metal fell 0.5 percent yesterday its fourth straight decline.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net