The Federal Government is expected to announce a support plan for struggling Nyrstar, part of a group well known for its toxic activities. Jude Manning reports.
Nyrstar produces lead and zinc and operates smelters in Port Pirie, South Australia and Hobart, Tasmania, which have been running losses of tens of millions of dollars per month amid rising energy costs and a global collapse in treatment fees.
Nyrstar is owned by Trafigura, a Singapore-based multinational with a grubby record ($) of bribes, illegal waste dumping, and attempts to shut down media scrutiny.
Nyrstar’s losses have prompted a review of Nyrstar’s Australian operations by Trafigura. In an effort to mitigate losses, the smelters have cut production by 25%, ceasing operations during peak periods of electricity demand, but have so far avoided any layoffs.
It is asking for the government to contribute ‘transitionary support’ while it conducts a $45m feasibility study of smelter upgrades at Port Pirie and Hobart, whose estimated costs total $1B. The proposed upgrades include expansion of capabilities for critical minerals processing, which can be captured as byproducts of zinc and lead refining.
Protecting the workforce
Over 1400 workers are employed at the two smelters combined, each with hundreds of suppliers underpinning thousands of indirect jobs. Both Tasmania Liberal Premier Jeremy Rockliff and opposition leader Dean Winter agree on the need to keep Nyrstar running, and the premier has confirmed he is working with the South Australian and federal governments, “To secure the operations of Nyrstar in Hobart.”
Dean Winter pledged $25 million in State funding yesterday morning if elected in the upcoming Tasmanian election on July 19. Stating that if Nyrstar shuts down, “The loss of hundreds of jobs and the flow-on impact to contractors and reliant businesses would devastate the local economy as well as jeopardise the viability of other industrials.”
It is clear to me that the cost of not supporting Nyrstar will be greater than the cost of supporting it.
This might well be true for the Tasmanian economy today. However, if Nyrstar’s operations cannot become profitable, government support for the smelters might only delay the inevitable, at massive cost to the taxpayer.
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Nyrstar revenue collapse
Nyrstar CEO Matt Howell states, “We’re looking for a hand up, not a hand out.” But what has caused the company’s revenue collapse? How much government support has it received already? And how much more does it really need to become self-sufficient?
Nyrstar claims Chinese subsidisation has created oversupply in metals processing, pushing smelters around the world into the red as it seeks to monopolise global supply of metals refining and the critical minerals that come with it.
According to Mr Howell, China has subsidised companies to purchase Australian raw materials at prices Australian smelters cannot afford. It then subsidises their processing and later places export controls on the finished product, which includes not only refined zinc and lead but also critical minerals such as antimony, bismuth, tellurium, germanium, and indium.
Amongst other uses, these minerals are considered essential in batteries, solar cells, rocket propellants, ammunition and as semi-conductors.
Existing subsidies
Treatment fees for zinc and lead have indeed dropped dramatically. Each year, the benchmark price is set by the contract between Korea Zinc and Teck Resources over the cost of refining ores from Red Dog, the world’s largest zinc mine in Alaska.
In March this year, Korea Zinc agreed to a fee of US$80 a tonne, down from US$165 last year, the lowest in a decade.
However, while market conditions are difficult, there is no indication that China will cease subsidising its smelters any time soon. Furthermore, Nyrstar already enjoys massive government subsidies.
Its shipping is subsidised under the Tasmanian Freight Equalisation Scheme, which cost the government $184m in 2023-24, of which Nyrstar is the largest beneficiary. It was promised last year a combined $70 million from the State and federal governments to upgrade the Hobart smelter, which apparently was not enough to go ahead with the investment, even before treatment fees were halved.
It also enjoys cut-price green power, which the Tassie government could instead export to the rest of Australia for a better return.
If existing subsidies haven’t been enough, and increased competition globally has made zinc smelting unprofitable,
why should taxpayers foot the bill to prop up such an uncertain industry?
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Owners looking for a handout
Trafigura is a “leading supplier of commodities, founded in 1993.” It posted a half-year net profit of US$1.5B, up from a US$2.8B full-year profit in 2024.
Nyrstar’s pitch relies on the strategic value of critical minerals it can capture through upgrades to Hobart and Port Pirie, as well as the maintenance of sovereign industrial capacity that depends on metals processing capabilities.
While aspiring to eventually become profitable, even Nyrstar’s own executives play down the possibility, with chief executive officer Richard Holtum saying earlier this year:
“Critical infrastructure and smelting capacity is a national security issue and therefore needs to probably have some sort of government ownership or significant government support for it because it is not competitive on an international basis comparing it to the Chinese smelters.”
According to Nyrstar, their facilities are the sole locations in Australia with the potential to capture the critical minerals associated with lead and zinc refining.
This means the failure of the smelters would be a big hit to the government’s Future Made in Australia plans. The policy aims to secure critical minerals supply chains for domestic and allied nations, while capturing a higher proportion of the revenue stemming from our natural resources by moving further up the value chain into processing.
However, given they are used in such small volumes, demand for critical minerals does not rival established mining exports such as Iron Ore.
And even if other countries are serious about diversifying their supply chains away from China (for which they will always have to neglect a cheaper product), there are other destinations than Australia. Even Australian mining companies are investing elsewhere. Rio Tinto and BHP’s latest rare earth investments are in South America, not Australia.
Australia has gained no concrete commitments from its allies regarding an appetite for our critical minerals and metals processing, and has so far failed to leverage supply in negotiations with the US over tariff exemptions and military spending.
With future demand far from certain, massive subsidies already being poured into Nyrstar, and market conditions unlikely to improve, the government may be making a significant gamble in continuing to support Nyrstar.
When will governments learn that picking winners is neither their role nor their forte?
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