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04-10-2015, 08:15 PM
#711
Originally Posted by Hoop
The chart doesn't look quite as bad if you convert from USD to NZD - Tiwai cost base very sensitive to USD / NZD rate - aluminium spot in a downtrend but so is USD / NZD - not to downplay the aluminium spot price decline this year but it could be much worse for NZAS / Rio.....
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04-10-2015, 08:42 PM
#712
Attachment 7639
Originally Posted by Crackity
The chart doesn't look quite as bad if you convert from USD to NZD - Tiwai cost base very sensitive to USD / NZD rate - aluminium spot in a downtrend but so is USD / NZD - not to downplay the aluminium spot price decline this year but it could be much worse for NZAS / Rio.....
Yeah nah, it still looks pretty bloody awful in NZD as well. The 2014 party is over and despite NZD decline to USD the Alu spot is soft to weak. This has been going on for ages now, no wonder Rio/NZAS are questioning the viability, but I think they're pretty much stuffed and have to dig in, wait out the price weakness, or suffer an intolerable exit cost.
Jmho.
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04-10-2015, 10:32 PM
#713
Originally Posted by Baa_Baa
Attachment 7639
Yeah nah, it still looks pretty bloody awful in NZD as well. The 2014 party is over and despite NZD decline to USD the Alu spot is soft to weak. This has been going on for ages now, no wonder Rio/NZAS are questioning the viability, but I think they're pretty much stuffed and have to dig in, wait out the price weakness, or suffer an intolerable exit cost.
Jmho.
No different to coal / steel / oil markets - how much can each individual producer take before they quit or their bankers make them quit....many factors at play - is this a structural shift or can you last longer than your competitor....interesting times
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05-10-2015, 09:05 AM
#714
Originally Posted by stoploss
demand growing but our friendly generators have shut a few plants recently .... Doesn't make sense , apart from trying to keep pumping prices up , way faster than inflation .....
Is Electricity the only commodity that keeps going up in price .....?
If you think about it, the retirement of expensive thermal generation capacity at this time makes perfect sense.
The collective generators have gone from an over-capacity situation with a major customer threatening to leave every 2 years, and using this as leverage to keep the price low = negotiating power was with Rio Tinto
Whereas the situation has now become - one of the generators will need to commit substantial capital to build new capacity which would not be required if Tiwai Pt shut down, so the price Rio Tinto pays for electricity must rise, or Rio Tinto can close the plant and pay $500M in clean-up costs when their revenue stream is already under pressure = negotiating power now with generators
You will note that the announcements of plant closure came almost immediately after the latest Tiwai Pt deal was inked. Rio Tinto got blindsided
Very smart positioning if you ask me
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05-10-2015, 10:21 AM
#715
Originally Posted by xafalcon
If you think about it, the retirement of expensive thermal generation capacity at this time makes perfect sense.
The collective generators have gone from an over-capacity situation with a major customer threatening to leave every 2 years, and using this as leverage to keep the price low = negotiating power was with Rio Tinto
Whereas the situation has now become - one of the generators will need to commit substantial capital to build new capacity which would not be required if Tiwai Pt shut down, so the price Rio Tinto pays for electricity must rise, or Rio Tinto can close the plant and pay $500M in clean-up costs when their revenue stream is already under pressure = negotiating power now with generators
You will note that the announcements of plant closure came almost immediately after the latest Tiwai Pt deal was inked. Rio Tinto got blindsided
Very smart positioning if you ask me
Exactly. Good analysis. Tiwai affects all generators, not just Meridian. But my view is that Tiwai will not be cleaned up. Too expensive. The site would be redesignated as 'Heavy Industry' which would attract any companies that are a bit messy.
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05-10-2015, 10:31 AM
#716
On another point ;if ElNino is going to have the impact they say it will; which Generator will benefit the most and which will get the least rainfall?. Im thinking Meridian to get the Southern alps runoff as a plus(as they should get a lot of rainfall) and not sure who is worst placed Mighty River on the Waikato maybe.
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05-10-2015, 10:35 AM
#717
Originally Posted by mouse
Exactly. Good analysis. Tiwai affects all generators, not just Meridian. But my view is that Tiwai will not be cleaned up. Too expensive. The site would be redesignated as 'Heavy Industry' which would attract any companies that are a bit messy.
I wouldn't be so sure the government won't insist on full site clean-up. Remember how Rio Tinto used the power companies share floats as a lever and threatened to pull out. The government had to stump up $30M (from memory) to get them to stay a little longer. That situation will be at the forefront of politicians minds when RT finally pull up stumps and leave. Payback's a b*tch
Playing hard-ball with the government and essentially blackmailing them was a very short-sighted business decision IMO.
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05-10-2015, 10:35 AM
#718
Originally Posted by mouse
Exactly. Good analysis. Tiwai affects all generators, not just Meridian. But my view is that Tiwai will not be cleaned up. Too expensive. The site would be redesignated as 'Heavy Industry' which would attract any companies that are a bit messy.
I dont think thats allowed. And no one would purchase the land without the clean up done (or a corresponding reduction in purchase price).
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05-10-2015, 11:10 AM
#719
Originally Posted by Harvey Specter
I dont think thats allowed. And no one would purchase the land without the clean up done (or a corresponding reduction in purchase price).
Aside from the question of the clean-up and whether RIO would contemplate the expense, how attractive would a heavy industrial site in Bluff be to a potential purchaser? After all, the smelter's only there because of its relative proximity to Manapouri and its subsidised electricity - and the port, of course. Who might be interested in that site, without subsidised power!
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05-10-2015, 11:47 AM
#720
Originally Posted by macduffy
Aside from the question of the clean-up and whether RIO would contemplate the expense, how attractive would a heavy industrial site in Bluff be to a potential purchaser? After all, the smelter's only there because of its relative proximity to Manapouri and its subsidised electricity - and the port, of course. Who might be interested in that site, without subsidised power!
Any new large industrial of that scale is unlikely in NZ again given cheaper costs and scale from doing it in Asia. NZ needs to focus on value add going forward, not commoditisation. Fonterra is a perfect example in that it has lead the race to the bottom as far as milk price has gone (look at historical milk price on a real basis).
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