Bill shock may pull plug on 1000 smelter jobs
Hundreds of jobs at one of Queensland's biggest manufacturers are under threat if surging power prices are not brought under control.
Gladstone's Boyne Island aluminium smelter, which is majority-owned by mining giant Rio Tinto, is one of only four smelters left in Australia, all of which are facing unsustainable power costs.
Rio earlier this month announced the closure of its New Zealand smelter, blaming high energy costs and failure to secure a power price reduction under a long-term contract needed to keep the smelter operating.
Rio Tinto chief executive Jean-Sebastien Jacques said earlier this year that Australian smelters such as Boyne Island were on "thin ice" due to the high electricity costs and low aluminium prices.
"The ice is actually becoming slightly thinner," he said.
"The situation is very challenging - there is no doubt about it."
The mining giant will release its half-yearly results on Wednesday where the performance of its loss-making Pacific Aluminium business will be updated.
The company is in discussions with Federal and State governments, including with the appropriate utility provider, about how to deal with high energy costs.
The Boyne smelter, which employs close to 1000 people in the Gladstone region, operates under a long-term power contracts that runs to 2029, making it difficult to negotiate lower energy prices.
Bank of America analysts say Australia's four remaining aluminium smelters at Boyne, Portland in Victoria, Tomago in NSW and Bell Bay in Tasmania are under mounting pressure from increasing electricity prices and high CO2 emissions.
"Rio Tinto has warned the current situation is unsustainable, with its Australia smelters on thin ice," the analysts said. "Alcoa has similarly warned on its Portland smelter, with its existing government-subsidised energy deal due to expire in mid-2021."
Australian Aluminium Council executive director Marghanita Johnson said the closure of the New Zealand smelter put the focus on the sustainability of Boyne and other Australian smelters that faced similar issues around high power prices.
Ms Johnson said electricity prices in Australia were among the most expensive in the world for electricity intensive manufacturing like aluminium smelting.
The Boyne smelter consumes 10 per cent of the state's electricity output and played a vital role in stabilising the grid in periods of peak demand.
She said internationally competitive electricity prices would drive growth in the electricity intense sector and protect good quality manufacturing jobs.
"This would move Australia's electricity intensive industries facing the question of survival, to being facilities able to attract capital investment," she said.
She said Australia was the second largest manufacturer of alumina in the world and the sixth-largest maker of aluminium.
That meant there was a greater potential for value-adding in an industry that already produces $15 billion worth of exports for Australia.
Originally published as Bill shock may pull plug on 1000 smelter jobs