South32 Halts Mozal Aluminium Smelter Operations Amid Electricity Supply Dispute

South32 Ltd. Has announced the cessation of operations at its Mozal aluminium smelter in Mozambique, citing a failure to secure affordable electricity supplies. The decision, effective immediately, will result in approximately $60 million in employee separation costs and casts a shadow over Mozambique’s economy, where aluminium exports accounted for $1.1 billion in 2023.

Years-Long Negotiation Failure

According to a company statement, South32 engaged in six years of negotiations with the Mozambican government and Eskom Holdings SOC Ltd., South Africa’s state-owned power utility, to secure favorable electricity pricing for the Mozal smelter, located outside of Maputo. These efforts proved unsuccessful, leading to the decision to place the operation into care and maintenance. Bloomberg reported on the outcome of these negotiations.

Impact on Employment and Economy

The closure of Mozal is expected to have significant repercussions for Mozambique’s labor market and economic stability. Approximately 2,500 workers and contractors are at risk of losing their jobs in a country already grappling with high youth unemployment. Bloomberg highlights the potential for widespread job losses.

Ownership Structure and Future Operations

The Mozal smelter is jointly owned by South Africa’s Industrial Development Corp. (32.4%) and the Mozambican government (63.7%). Following the suspension of smelting operations, Mozal will focus on selling alumina, sourced from the Worsley refinery in Australia, to third parties at index-linked pricing.

Electricity Supply Challenges in Southern Africa

The situation at Mozal reflects broader challenges facing energy-intensive industries in Southern Africa. The expiration of previous special pricing agreements has led to escalating electricity costs and supply instability. In South Africa, only 11 out of 66 smelting factories remain operational due to these factors. The closure of Mozal will free up approximately 950 megawatts of power.

Concerns Over Recent Tariffs

South32 CEO Graham Kerr expressed disappointment with the outcome, stating, “This is not the outcome we wanted.” The company had previously voiced concerns that a proposed new tariff, set to take effect in early 2026, would render the Mozal plant economically unviable. Vice President of Supply, Rob Jackson, had indicated that the most likely scenario was care and maintenance following the expiration of the current electricity supply agreement in March 2026.

Financial Implications for South32

South32 has already recorded a $372 million write-down in anticipation of the closure. The company placed the operation into a state of care and maintenance yesterday, triggering the $60 million in employee separation costs.