Africa's Second-Largest Smelter Faces Closure

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The second-largest aluminum smelter in Africa is to start a progressive shutdown following the failure of Australian owner South32 Limited (Perth, Australia) to secure a new electricity deal with the government of Mozambique.

South32, the largest shareholder in Mozal Aluminum, said that negotiations had so far failed to secure a viable electricity price going forward, threatening the future of the country's largest industrial employer. Mozal employs more than 2,500 people and tens of thousands in the indirect supply chain. "We have continued to engage with the Government of the Republic of Mozambique, Hidroeléctrica de Cahora Bassa (HCB) and Eskom on securing sufficient and affordable electricity supply to enable Mozal to operate beyond March 2026, when the current agreement expires. These engagements do not provide confidence that Mozal will secure sufficient and affordable electricity beyond March 2026. As a result, we will limit investment in Mozal, stopping pot relining and standing down associated contractors starting this month. Without access to sufficient and affordable electricity, we expect that Mozal will be placed on care and maintenance at the end of the current agreement."

The smelter, located in the Maputo province, was forecast to produce 350,000 tonnes of aluminium in 2025, but thanks to drought and prolonged power negotiations the company had warned of a drop in output and taking a financial hit. Mozal's production for financial year 2026 is now expected to be approximately 240,000 tonnes "reflecting fewer pots in operation as we stop pot relining and operations continuing only to March 2026." It added: "As a result, we will recognize an impairment of US$372 million (same amount post tax) for Mozal with our FY25 financial results, which includes US$339 million of property, plant and equipment, US$7 million of intangible assets and US$26 million of raw materials and consumables. The impairment reflects our assessment that the most likely scenario is for Mozal to operate until the end of the current electricity supply agreement and be placed on care and maintenance in March 2026."

Speaking to the press last week, Graham Kerr, chief executive officer of South32, warned: "My belief is: if you shut Mozal, you never start it again. It's just too hard". The Government said it will not yield to pressure from South32. Mozambique's President, Daniel Chapo, said the tariffs being proposed by South32 and its partners would drive the hydroelectric operator out of business. "What we are doing right now is defending the national interest and the interests of the Mozambican people. [...] We have an increased responsibility as a government. We cannot accept tariffs that will lead HCB to subsidize Mozal and collapse HCB, which is our golden goose."

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