Recently, Tomago, Australia’s largest aluminum plant – accounting for 37% of national production – issued a warning to its employees due to the breakdown of energy contract negotiations: if an affordable energy agreement cannot be reached before 2028, this giant factory with an annual output of 590000 tons of primary aluminum will be completely shut down.

Tomago Aluminum Plant is located in New South Wales and consumes 10% of the state’s industrial electricity annually. Its unit energy cost has long been among the top aluminum plants in the world. According to internal documents, the current energy contract will expire at the end of 2027, and the new electricity price proposed by the supplier has increased by more than 40%, directly pushing up the production cost of one ton of aluminum to $2800/ton, far exceeding the current market price of $2300/ton for London aluminum futures.

This is equivalent to losing $500 for every ton of aluminum produced, “said Mark Cassell, President of the Australian Aluminum Association.” Tomago’s closure will result in a sharp decline in national primary aluminum production to less than one million tons, completely losing export competitiveness. “

Faced with the crisis, New South Wales Premier Chris Mints and Federal Energy Minister Angus Taylor formed a joint working group to attempt to rescue the aluminum plant through policy intervention. But according to the Sydney Morning Herald, the government’s proposed “energy subsidy+capacity quota” plan has been rejected by Tomago management, citing that “long-term dependence on subsidies is unsustainable”.

The state government urgently denied rumors that it had never considered billions of dollars in aid, but acknowledged that it is exploring a “phased electricity price cap mechanism”. Analysis indicates that if Tomago closes, at least 40% of its 6000 employees will face structural unemployment, and related industry chain enterprises or collectives will relocate southward to Queensland’s affordable energy zone.

The Tomago crisis reflects deep-seated contradictions in the global aluminum industry: under the pressure of carbon neutrality, 80% of aluminum plants in Europe have transformed into recycled aluminum, while Australia still relies on high energy consuming electrolytic aluminum. Data shows that by 2025, the proportion of global recycled aluminum production will reach 35%, and China will occupy 47% of the market share with its well-established recycling system.

While Australia is struggling at AUD 0.35 per kilowatt hour, the electricity cost for Chinese recycled aluminum companies has dropped to AUD 0.08, “said Sarah Liu, a metal analyst at Macquarie Group.” Tomago’s predicament may accelerate the global aluminum industry’s shift towards clean energy bases. “

The Tomago incident is not an isolated case. In the past three years, 12 steel and chemical companies in Australia have exited the market due to energy costs. The report from the Federal Parliament’s Energy Committee shows that industrial electricity prices in Australia will increase by 217% in 2025 compared to 2010, while the United States will only increase by 34% during the same period.

We are experiencing deindustrialization, “warned Alan Pearce, a professor of energy policy at the University of Sydney.” When the speed of new energy transformation cannot keep up with the decline of traditional industries, the hollowing out of manufacturing will shake the foundation of the national economy

This aluminum plant survival battle triggered by energy contracts may ultimately become a turning point in Australia’s energy policy transformation. Finding a balance point between green energy and industrial protection tests the wisdom of decision-makers.