Mozal Aluminium Production Slashed to 240kt as Electricity Supply Woes Mount

Electricity Supply Challenges Cast Shadow Over Mozal

South32 Limited has issued a sobering update on its Mozal Aluminium operations in Mozambique, revealing that ongoing negotiations with local authorities and power suppliers have failed to secure a reliable and affordable electricity supply beyond March 2026. This uncertainty has forced the company to take decisive action, including limiting further investment and preparing for a potential operational pause.

Operational Impact and Production Outlook

As a direct consequence of the power supply concerns, South32 will cease pot relining activities starting this month, a key maintenance process essential for sustained aluminium production. The company anticipates that Mozal’s aluminium output will drop to approximately 240,000 tonnes in the fiscal year 2026, reflecting a reduced number of operational pots and a truncated production timeline ending in March 2026.

Financial Repercussions, A Significant Impairment

In light of these developments, South32 has completed a carrying value assessment of Mozal Aluminium, resulting in a substantial impairment charge of US$372 million to be recognized in its FY25 financial results. This impairment encompasses property, plant and equipment, intangible assets, and raw materials, and reflects the company's current expectation that Mozal will be placed on care and maintenance once the existing electricity agreement expires.

Strategic and Market Implications

The decision to impair Mozal’s value and scale back operations signals a cautious stance amid a challenging energy landscape in Mozambique. South32’s move underscores the critical importance of stable and affordable power in sustaining energy-intensive aluminium production. While the impairment will be excluded from underlying earnings, the market will be closely watching how these developments influence South32’s broader portfolio and future investment decisions.

Looking Ahead

South32’s update leaves open the possibility that new agreements or solutions could alter Mozal’s fate, but for now, the company is bracing for a period of care and maintenance. The coming months will be pivotal in determining whether Mozal can resume full operations or if the power supply challenges will force a longer-term shutdown.