9 July 2020

Tiwai Point smelter closure announcement devastating for Southland region

The Tiwai Point aluminium smelter closure announcement is devastating news that will have significant and wide-ranging impacts on the region, Southland Chamber of Commerce President Neil McAra says.

The ripple effect on Southland could be not underestimated, he said.

“This will be a hammer blow for the entire Southland community impacting unemployment, business, housing prices, and the wider social and cultural fabric of Southland.”

New Zealand Aluminium Smelters (NZAS) contributes approximately $406 million to the Southland economy (6.5 per cent of Southland’s GDP) annually, with export revenue of around $1 billion each year.

The Chamber recognised the NZAS team had achieved significant efficiencies at the smelter in recent years, but ultimately it appeared they could not continue to operate in the face of consistently lower and volatile aluminium prices, coupled with uncompetitive energy prices, McAra said.

The Chamber was calling on the Government to explore any remaining potential options it had to try and achieve a pathway to profitability for the smelter, which directly and indirectly employs 2260 full- time equivalent employees and contractors.

“We want the government to not just provide support in creating new jobs in our region, but support to keep the existing jobs”

In late 2019, the Fight for Fairness campaign was launched pushing for the smelter to secure an internationally competitive power arrangement that would enable it to be consistently profitable, and a transmission charge that more accurately reflected the service it received, he said.

“This would have helped ensure NZAS was well placed to continue to be a vibrant part of the Southland economy, and to continue being a significant export earner for New Zealand.”

A proposed change by the Electricity Authority announced in February could have opened the way for the smelter to apply to pay less to Transpower in transmission charges, which cost it between $60 million and $70 million a year. However, it was a case of “too little too late”, McAra said.

The closure would have a severe impact on many Southland businesses that sub-contracted to the smelter. It had been the springboard for several of these companies to take their innovation to the world, he said.

The belief the closure of Tiwai would result in cheaper power prices for the rest of the country was unfounded, he said.

“The smelter has given 12 months’ notice to terminate its contract with Meridian Energy, which gives electricity generators ample time to adjust supply to the market, and when demand goes down, supply follows.

“New Zealanders will not get cheaper power. In fact, they would have to pay millions of dollars to build more grid infrastructure to get power out of Southland to the north as right now the grid cannot handle the extra volume.”

The smelter has also played a valuable role supporting a wide range of community initiatives during its almost 50 year existence, he said.

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