Several months ago, the future of the Rio Tinto smelter at Tiwai Point was in grave doubt. The price of aluminium was in free fall and competition from overseas smelters was growing. A business that employs several hundred Southlanders directly and which requires 40% of the power generated by Meridian Energy was in danger of closing its doors and causing a potential exodus of thousands of people from a province that has little more than 100,000 residents.
Now it has been saved from closure for the time being by a government bail out of N.Z$30 million, which the Treasurer, Bill English, says is a one off gesture. That is great for Southland’s immediate future, but it raises questions about how sustainable Tiwai Point is in the long term?
Labour and the Greens are unhappy about the deal, claiming that the real winner is not Southland or the 800 people the smelter employs, but Rio Tinto. Labour Party Member of Parliament and State Owned Enterprises spokesperson, Clayton Cosgrove claims that the sale “greases” the assets sales programme by allowing Rio Tinto to walk away from the deal with only a 15-month notice period instead of the normal 36 month period. The Greens and Labour, whilst being the opposition whose job is to destroy government policy, seem to forget that without the smelter and the power station, several thousand Southlanders would be forced onto the unemployment benefit, forced to take other jobs or forced to leave the province.
Yes, I accept that the smelter has a few questions to answer, such as:
- How is it dealing with the industrial asthma contracted by staff with a long service record at the smelter from handling substances that are able to infiltrate and inflame lungs?
- Does the smelter have a long term survival plan for when the Government funding runs out?
- What would it let happen to the complex if it were to close?
I am sure these are questions that the executive of Rio Tinto in New Zealand would want to see disappear, but any belief that they might profess to have about “best practices” for the plant are dubious. They are dubious because if Rio Tinto had been paying more attention to the state of the aluminium market it would have known that other smelter owners were making inroads on its profits. Rio Tinto would have also understood that the price of aluminum was falling, in part because the economic slowdown in China and Australia. The latter exports about 68,000 tons of bauxite a year to be turned into aluminium, which was about 30% of total bauxite exports in 2010. The down turn in demand for aluminium, combined with labour and other operating costs have been largely to blame for an associated down turn in the bauxite market.
I am pleased for the 800 people who work there and the thousands who work in jobs in other sectors related to the smelter, that they still have their jobs. I am also pleased for the people at Meridian who will still have jobs from the need to maintain and operate the Manapouri underground power station. However some job losses may be inevitable in the long term because there is no obligation to Rio Tinto after 2016 ends.