Rio Tinto-backed Tomago Aluminium has reached an agreement with Australia’s federal and New South Wales governments designed to secure the future of the country’s largest aluminium smelter through 2038.
Under the arrangements announced Thursday, Tomago will enter into a 10-year power purchase agreement covering electricity supplies after its existing contract expires at the end of 2028. The smelter is expected to transition to electricity sourced entirely from renewables from 2033.
Tomago, located near Newcastle in New South Wales, is the state’s largest electricity consumer and can produce as much as 590,000 metric tons of aluminium annually, representing almost 40% of Australia’s production.
The company will invest A$1.1 billion in real terms in the facility through 2038 as part of the agreement, including A$100 million allocated to decarbonisation projects.
Rio Tinto said the switch to fully renewable electricity from 2033 is expected to cut Tomago’s Scope 1 and Scope 2 operating emissions by 7.1 million metric tons annually.
Electricity costs are a critical factor for aluminium smelters because the metal’s production is highly power-intensive. Securing competitive long-term electricity supplies has therefore become central to maintaining Australian smelting capacity as the country’s power system shifts toward renewable generation.
Tomago will also continue providing demand-response services to the New South Wales electricity grid, reducing its electricity consumption during periods of system stress to help balance supply and demand.
The agreement follows a March 2026 arrangement involving Rio Tinto and the Australian and Queensland governments that provided a pathway for the Boyne aluminium smelter in Gladstone to remain competitive beyond the end of its current electricity contract.
With agreements now in place for Tomago and Boyne, Australia’s two largest aluminium smelters have pathways to longer-term, lower-carbon electricity supplies.
Tomago Aluminium is an independently operated joint venture in which Rio Tinto owns 51.55%. Gove Aluminium Finance holds 36.05%, while Norsk Hydro owns the remaining 12.4%.
The smelter directly employs around 1,000 people and approximately 200 full-time-equivalent contractors. Its existing electricity supply agreement with AGL expires in December 2028.
By Charles Kennedy for Oilprice.com
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