Bell Bay Aluminium and CPT Engineering yesterday announced a supply agreement worth $3.7 million.

The venture has already begun and will see family-run business CPT manufacture 13,000 steel-copper anode rods for the smelter throughout the next four years.

The rods will replace existing ones at the smelter that will gradually wear out.

Bell Bay Aluminium general manager Ray Mostogl said the company originally looked to China for the manufacturing, believing it to provide the lowest-cost outcome.

``We really believed we were going to get them manufactured in China and all indications were that that was going to be the best proposition,'' Mr Mostogl said.

``Before we committed to that, we had the discussion with Geoff and his team . . . (we) found a way to manufacture those anode rods here in George Town.''

Mr Mostogl said the benefits of manufacturing within the same town went beyond logistics.

``(Morally) there's the strength that comes from having a high-capability engineering facility on your doorstep that supports the smelter,'' he said.

``Obviously the economy needs that money to flow around so we're much happier to see it spent here than overseas.

CPT managing director Geoff Watson said his business had invested about $2 million on new equipment to manufacture the rods.

Three people have also been employed directly to build the rods.

``Significant investment in new equipment and staff training is clear evidence of the commitment we have to provide our customers . . . It will also ensure we remain competitive against overseas companies in future,'' Mr Watson said.

George Town Mayor Roger Broomhall was among political figures at the announcement. 

Mr Broomhall welcomed the partnership, saying it was a significant initiative for the town.

The anode rods conduct electricity in cells, which convert powdered alumina to molten aluminium at 960 degrees.