Smelter closure pulls plug on energy stocks

The S&P/NZX 50 Index declined 266.39 points, or 2.3 percent, to 11,440.88. Within the index, 34 stocks fell, 13 rose, and three were unchanged. Turnover was $226.5 million.

The benchmark took a dive as New Zealand Aluminium Smelters - a joint venture between Rio Tinto and Sumitomo Chemical Company - gave Meridian notice to terminate the smelter’s power contract when it expires at the end of August next year. The mining giant had been reviewing the business for the past nine months to weigh up its viability as the cost of energy squeezed margins amid weak aluminium prices.

Greg Smith, head of research at Fat Prophets, said the news was a “bolt from the blue” that had reverberated across the energy sector.

When the strategic review was announced in October, energy companies were anticipating a staged closure of the smelter, if it happened at all, Smith said.