Rio Tinto cuts NZ aluminium output to save power

SYDNEY, May 16 (Reuters) - Rio Tinto Ltd/Plc (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz) said it will cut aluminium output by about 10 percent indefinitely at its 350,000 tonnes a year Tiwai Point, New Zealand, smelter to conserve power.

Efforts were underway to minimise the impact on customers, mostly overseas buyers, a company spokeswoman said.

The reduction, which started on May 2 with a 5 percent cut and intensified this week, comes as Rio works with its power supplier, Meridian Energy, to help reduce demand on New Zealand's national electricity grid, the spokeswoman said.

Low rainfall has pushed the levels of lakes used for hydroelectric generation in New Zealand into the so-called "minzone", a level of water storage below which authorities look at possible conservation measures.

About two-thirds of New Zealand's electricity is generated by hydro plants. Rio's smelter uses about 15 percent of New Zealand's total generated electricity.

The Rio spokeswoman said the overall effect will be to reduce aluminium output by around 2,900 tonnes per month, or 10 percent of total production. The smelter sells 86 percent of its output overseas.

Close to 90 percent of the power needs for the smelter were covered by a long-term contract with Meridian Energy for the supply of electricity, Rio said, adding it is exposed to market conditions for the remaining 10 percent.

"Our relationships with our customers and suppliers are important to our business and we are working with them to ensure that any adverse impact to current production schedules is minimised," the smelter's general manager, Paul Hemburrow said in a statement.

It is not the first time New Zealand's power needs have hit output at the smelter.