Monsters of Rock: Rio is on the lookout for wind and solar to power its aluminium business

Rio Tinto has issued a call for proposals to develop up to 4000MW of wind and solar to power its Queensland aluminium assets
It follows the company’s announcement last year it would spend US$7.5 billion on green capex by 2030 to halve Scope 1 and 2 emissions by 2030
ANZ commodity analysts say zinc prices will have to rise to fill a supply gap as green energy bolster demand for the base metal

Rio Tinto (ASX:RIO) has thrown down the gauntlet to power providers to source large scale wind and solar big enough to power its Queensland aluminium businesses in part of a move to halve its Scope 1 and 2 emissions by 2030.

The global mining giant is one of only a handful of aluminium and alumina producers of global scale.

Aluminium smelters and refineries use some of the most energy intensive industrial processes on the planet, and Rio’s Boyne smelter and Yarwun and Gladstone refineries make up sizeable portions of Queensland’s overall energy usage.

Rio says it needs 1140MW of reliable power to operate the businesses, equating to at least 4000MW of wind and solar power with firming.

The miner says it wants to support the development of projects that will supply power to Rio’s Gladstone assets through the Queensland energy grid by 2030.

“As Queensland’s largest energy user, we have an important role to play in driving the development of competitive renewable energy sources for our Gladstone assets and supporting the State’s renewable energy targets,” Rio’s Aluminium CEO Ivan Vella said.

“It is early in the process, but this is an important step towards meeting both our Group climate change target of halving our emissions by the end of the decade and our commitment to net zero emissions by 2050.”

Rio has committed US$7.5 billion of capex to 2030 to advance renewable energy initiatives and decarbonisation primarily focused on its Australian aluminium and iron ore operations.

Rio Tinto (ASX:RIO) share price today:

Price of zinc “will need to rise”

Speaking of energy prices, they are having a big and unholy impact on supplies of a key metal for the energy transition right now: zinc.

The issue is not in zinc concentrates at the mine gate, where supply is current in a slight surplus.

Rather it is downstream at the refinery stage where the bottleneck is emerging.

Most of the world’s zinc is produced in smelters in Western Europe and China, both of which are struggling with extraordinarily high energy prices.

That has resulted in some high profile smelters heading into mothballs, with Nyrstar and Glencore last year putting two factories producing a collective 275,000t of metal out of action until power prices drop back below 150 Euros per megawatt hour, something which isn’t looking at all likely right now.

It could not come at a less opportune time. With rollouts of renewable energy and electric vehicles on the rise, more zinc is needed than ever before.

Prized for its anti-rusting qualities, zinc is used in galvanised steel, around 200kg of which is used in each EV.

Then there are solar panels and wind turbines. Around 4t of zinc is in each 10MWh offshore wind turbine while 240t of zinc is needed for every 100MWh solar farm where the base metal protects against corrosion.

The upshot is even though prices are near record highs — US$3821.50/t for metal for three month delivery on the LME — they may have to rise further to counter the impact of rising energy costs and supply gap that is creating, say ANZ’s commodity strategists Daniel Hynes and Soni Kumari.

“Even with record high zinc prices, we estimate European power prices need to fall below EUR150/MWh to incentivise smelters to reopen, but that’s well below current levels,” they said.

“At the same time, the push for more renewable energy infrastructure is set to pick up pace. Zinc is integral to solar and wind generators because of its anticorrosion properties, so zinc’s supply issues may hinder the world’s efforts to boost renewable energy generating capacity.

“The zinc market will push into a small deficit this year amid the supply shortages. This will worsen over the next two years. The price of zinc will need to rise further to rectify the shortage.”

That’s good news for the handful of stocks on the ASX exposed to zinc, many of whom have been chatting up the significance of the commodity to decarbonisation in recent times.

Head cheerleader has been Graham Kerr, the boss of major diversified miner South32 (ASX:S32), which is pursuing the development of its Talyor zinc and base metals mine in the USA despite a potential US$1.7 billion bill to make the project operational.

According to a PFS this year Taylor would produce 111,000t of zinc, 138,000t of lead and 7.3Moz of silver a year, with the potential for South32 to develop more orebodies at the expansive Hermosa project.