Nordural (Century Aluminium) pays a quarter less for its electricity in Iceland than the global average. This was revealed in a confidential leaked document to RUV.
It is the energy companies who carry the most risk when global aluminium prices fall.
The document is from Hatch consultants and is compiled on behalf of foreign banks and Nordural. It is stamped ‘confidential’ and covers actual figures on production costs, including energy prices. At the time of writing Nordural was paying 15 mill per kilowatt hour. A mill is one thousandth of a dollar, meaning 15 mill is 1.5 US cents, or 2 Icelandic kronur. Icelandic homes pay roughly 10 kronur per kilowatt hour, and British homes pay up to ISK 42 for comparison.
The electricity cost is connected to the market value of aluminium, which was USD 1,400 per tonne at the time of writing. If the aluminium price increases by USD 1,500 then the price of electricity supplied increases by 15 mill.
The price of aluminium has been roughly USD 1,500 per tonne for the last decade, but prices fluctuate rapidly and most experts predict a slight fall in average prices over the next decade. The document clearly states that Nordural is paying a quarter less for its electricity in Iceland than is average around the world.
Although the document relates to only one Icelandic aluminium smelter, Dr. Sigurdur Johannesson at Statistics Iceland believes heavy industry generally pays the same amount.
The suspected low electric price and the danger to Icelandic energy companies from changes in aluminium prices have been raising eyebrows for some time. And at least one financial advice website encourages investors to buy shares in Nordural’s mother company because of Iceland’s low and stable electricity prices.
Roughly a third of the sale price of aluminium runs to Nordural in pre-tax profit – providing the company with a three-time better deal than Icelandic energy company Landsvirkjun gets for its investment.
Why is this considered news at all? Cheap energy in Iceeland was THE main reason for settling that industry there, despite the higher transport costs! Or does anybody want to argue that the energy provider operates under a loss, despite the source being free natural sources? D’oh!
Economically, aluminium production in Iceland is a win/win situation. The concerns should be about the ECOLOGICAL impact instead!
Electricity in the UK is about 10p per KWhr, which is 19Krona. Natural gas for heating is about 2.5p per Kwhr.
Could anyone post what Geothermal heating costs in Iceland? It should be something around one quarter the cost of Electricity.
The current aluminium price is actually 2,200 USD per tonne. It hasn’t been 1500 since this time last year. Please do your homework properly next time.
Hi John,
It might have been better to make clearer that that was the price at the time of writing THE REPORT and not this article about the report!
Hope this helps and thanks for reading IceNews
Alex, editor
Looks complicated calculations.What i know about century aluminium is that they have posted a job offer for the summer. They needed 10 labourers and 600 asked for the job. Good luck for everybody maybe we meet all there next summer.hahhha
thanks Icy-news
The stated discount for the smelters does not appear exorbitant. All large industrial users get lower rates for constant large draws, and, usually, lower rates yet if they are able to time their large power draws to regular non-peak times. The lower rates incentive brings the large users and the lower rates encourages them to use power when their draws will be on extra capacity.
If you can compare ratios of industrial to consumer rates in other market areas outside Iceland where there are smelters you will be able to compile more useful data. It is, of course, Iceland’s ability to produce electrical power cheaper, so it can sell it cheaper, that makes it attractive to aluminium producers, who must smelt with electricity.
I don’t understand what it is the last paragraph of the article is comparing, or if what are being compared are comparable.