Rio Tinto said that it is left with no choice but to consider scrapping the power supply contract with Landsvirkjun and begin planning for the orderly closing of the aluminium smelter in Iceland
Rio Tinto considers scrapping the power contract with Landsvirkjun. (Credit: aymane jdidi from Pixabay)
Mining major Rio Tinto has filed a formal complaint in Iceland against Landsvirkjun, the country’s national power company, over its concerns on the ISAL smelter power agreement.
The complaint submitted to the Icelandic Competition Authority (ICA) by the miner alleges that Landsvirkjun has been abusing its market dominance. Landsvirkjun has been the energy supplier to the ISAL aluminium smelter owned by Rio Tinto in Hafnarfjörður.
Rio Tinto in its complaint said that the pricing terms of the power agreement for the aluminium smelter are biased, abuse Landsvirkjun’s market-dominant position, and cannot be justified.
The mining major said that it has come to the conclusion that Landsvirkjun is not willing to offer electricity purchase conditions that will enable the ISAL smelter to become sustainable and competitive.
Rio Tinto threatens to scrap contract with Landsvirkjun and close ISAL smelter
In February 2020, Rio Tinto launched a strategic review of the ISAL smelter after finding it to be unprofitable amid the challenging conditions faced by the aluminium sector. The company said that the filing of the complaint to the ICA marks the conclusion of the first phase of the review.
Rio Tinto said that it is left with no choice but to consider scrapping the power supply contract with Landsvirkjun and begin planning for the orderly closing of the smelter, leaving nearly 500 jobs at risk.
The mining major said that the supply contracts of the Icelandic national power company bind customers to long-duration terms, thereby preventing alternative energy suppliers from either foraying into the Icelandic market or in expanding their operations.
Rio Tinto wants the Icelandic Competition Authority to look into the alleged anti-competitive conduct by Landsvirkjun pertaining to discriminatory pricing and long-duration power contracts. If the competition regulator addresses the issues, then the ISAL smelter and other manufacturing and businesses in Iceland will be in a position to compete globally, said the miner.
Rio Tinto aluminium chief executive Alf Barrios said: “Landsvirkjun’s abuse of its dominant position in the Icelandic energy market needs to be addressed or Iceland is in danger of losing export industries with major employment like ISAL.
“ISAL pays significantly more for its energy than other aluminium producers in Iceland, which undermines its competitive position in the market. We cannot continue to produce aluminium in Iceland if the power pricing system is not transparent, fair and internationally competitive.”