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  1. #711
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    Quote Originally Posted by Hoop View Post
    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.....

  2. #712
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    Attachment 7639
    Quote Originally Posted by Crackity View Post
    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.

  3. #713
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    Quote Originally Posted by Baa_Baa View Post
    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

  4. #714
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    Quote Originally Posted by stoploss View Post
    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

  5. #715
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    Quote Originally Posted by xafalcon View Post
    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.

  6. #716
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    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.

  7. #717
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    Quote Originally Posted by mouse View Post
    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.

  8. #718
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    Quote Originally Posted by mouse View Post
    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).

  9. #719
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    Quote Originally Posted by Harvey Specter View Post
    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!

  10. #720
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    Quote Originally Posted by macduffy View Post
    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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