Australian resources company South32 Ltd is bracing for a potential shutdown of its flagship Mozal aluminium smelter in Mozambique, after failing to secure a sustainable power supply deal. The company expects to take a $372 million impairment against the operation, marking another blow to the country’s aluminium industry.
The smelter’s current electricity agreement, which relies primarily on Hidroeléctrica de Cahora Bassa (HCB) with backup supply from South Africa’s Eskom, is due to expire in March 2026. Negotiations for a new tariff have been ongoing for months, but South32 says the proposed rates would leave Mozal unable to compete internationally.
Tariff Deadlock Threatens Viability
South32’s CEO, Graham Kerr, warned that without a workable tariff, the smelter cannot remain operational.
“The price expectations of counterparties would make Mozal internationally uncompetitive,” Kerr said. “Based on current engagements, we do not have confidence that sufficient and affordable electricity will be available after March 2026.”
As a precaution, the company plans to suspend non-essential activities, including pot relining, and curb further investment in the facility.
Production Set for Sharp Decline
If no deal is reached, Mozal’s output will drop dramatically. South32 projects its share of production will fall from 355 kilotons in FY2025 to around 240 kilotons in FY2026, reflecting the reduced operations ahead of the planned mothballing.
Economic Ripple Effect
Mozal is one of Mozambique’s most important industrial assets, providing significant employment, export revenue, and industrial infrastructure. Any prolonged shutdown could ripple across the economy, affecting jobs, foreign currency inflows, and related industries.
Still Hope for a Lifeline
Despite the bleak outlook, South32 insists closure is not yet final. Talks with the Mozambique government, HCB, and Eskom are continuing in hopes of reaching a compromise that preserves the smelter’s operations beyond 2026.
“We are hopeful a workable solution emerges that enables Mozal to continue contributing to Mozambique’s economy,” Kerr said.
History of Disruption
This marks the second major operational setback for Mozal in less than a year. In December 2024, nationwide protests in Mozambique caused significant disruptions, adding to the smelter’s production challenges.