New Zealand PM: Alumininum smelter "must stand on its own two feet"Published by MAC on 2013-04-09
Source: Reuters, statement
Is it finally time to call Rio Tinto's bluff?
There's been a fifty year-long battle at bringing Rio Tinto to account (literally) for its exploitation of hydro power, to feed its Tiwai Point smelter on New Zealand's South Island.
Now, the country's Prime Minister, John Key, appears to be calling Rio Tinto's bluff (ironically, also the name of the smelter itself). See: Rio Tinto plays 'godfather' in Aotearoa-New Zealand
MAC readers may recall that the full terms of the secret power deal, arrived at between Rio Tinto and the NZ government back in the seventies, have still not been fully divulged.
But, few observers doubt the company has been gaining cheap power at massive expense to taxpayers and consumers, ever since.
Rio wants an extension of that subsidy, because it's losing money hand over fist. And finally the government seems to have resisted this.
However, one workers' union isn't in favour for obvious reasons (loss of jobs). And, as Reuters reports:
"Power suppliers fear if the smelter closes it would create a glut of electricity and drive down power prices nationwide. That in turn could jeopardise Key's plans to partially privatise Meridian [which supplies the smelter with power] and two other state-owned power companies" .
We've yet to see whether Mr Key will follow through on his threats, or whether Rio Tinto will, once again, win the day.
Far more certain is that citizens as a whole would welcome gaining access to the cheap power that Rio Tinto has, for so long exploited with such impunity.
Also below is a good history of the Bluff smelter's early years (Tracing the history of Tiwai Pt), when the company was known as Comalco. Another history is in CAFCINZ's own wonderful Comalco comic "The Amazing Adventures Of Power Junky: The True Story Of Comalco In NZ" (Pete Lusk & Ron Currie, 1977, updated 1982), online at: http://www.historicalwatchdog.blogspot.co.nz/2009/01/comalco-comic.html
Nothing much has changed!
Rio smelter "must stand on its own two feet" - New Zealand PM
2 April 2013
WELLINGTON/SYDNEY - Rio Tinto's loss-making aluminium smelter in New Zealand, which wants a government break on its electricity bill to stay afloat, must learn to "stand on its own two feet," New Zealand Prime Minister John Key said after the firm rejected a short-term subsidy offer.
The 350,000-tonnes-per-year smelter in Tiwai Point in southern New Zealand is a victim of dire market conditions caused by weak demand and high Chinese production that's sent world aluminium prices into free fall since mid-February.
Commodities analysts say it could be years before conditions for producers improve and only after hundreds of thousands of tonnes of excess capacity is eliminated.
The New Zealand smelter falls under the recently formed Pacific Aluminium unit of Rio Tinto, designed to bundle 13 underperforming aluminium assets for closure, sale or spin off into a separate entity for an in-specie distribution to Rio Tinto shareholders.
Rio Tinto took an $11 billion writedown in 2012 because of losses in aluminium.
Key said Rio Tinto rejected the government's offer for help for the Tiwai smelter because the company was seeking a longer term price break than the government subsidy would provide.
"We have no interest in a long-term subsidy. If it can't stand on its own two feet, it shouldn't be there," Key told a New Zealand television network.
Pacific Aluminium has been holding talks directly with the state-owned electric company that supplies the smelter, Meridian Ltd, and said it believed a new deal could eventually be struck.
"We are of the view that a commercial agreement can be reached in relation to the NZAS (New Zealand Aluminium Smelters Ltd) electricity supply contract," Pacific Aluminium said in a statement emailed to Reuters."Our electricity contract negotiations with Meridian have progressed more in the past two weeks than in the previous nine months."
The 41-year-old smelter at the bottom of the South Island is the country's biggest power consumer, using around 15 percent of national output, and exports around NZ$1 billion ($837 million) worth of aluminium a year.
London Metal Exchange three-month aluminium prices stood at $1,900 a tonne on Tuesday, down 13 percent from its 2013 peak of $2,174 on Feb. 15.
A 17-year contract was signed by the smelter in 2007 and came into effect in January.
Meridian said last week there was a major gap between the two sides, and it doubted a new agreement could be reached.
Rio countered that they believed a deal was still possible. The company has previously raised the prospect the plant could be closed.
Last month, Pacific Aluminium's Gove alumina refinery in Australia narrowly averted closure with the loss of 1,400 jobs after reaching an 11th-hour deal over cheap gas supplies for 10 years.
"We know Rio can be a ruthless negotiator, but it's important the government remains involved in the smelter's negotiations with Meridian," Ged O'Connell, assistant secretary of the Engineering, Printing and Manufacturing Union, said.
"Whether the Government likes it or not, these negotiations are political and that means the buck stops with the Prime Minister," O'Connell said.
Power suppliers fear if the smelter closes it would create a glut of electricity and drive down power prices nationwide.
That in turn could jeopardise Key's plans to partially privatise Meridian and two other state-owned power companies: Mighty River Power Ltd and Genesis Energy, which is slated over the next three years.
Let the "Too Big to Fail" Smelter Fail
4 April 2013
"Too big to fail" was the mantra of the robber banks and other transnational financial sharks during the Global Financial Crisis, which remains ongoing. This left the victims to pay for the costs of the crime, while the corporate criminals walked away scotfree and kept their loot. The people of Cyprus are the latest to experience firsthand just how this works.
In this country, Rio Tinto's Bluff smelter was decades ahead of the fashion. Every time that Rio Tinto feels that its charmed existence in New Zealand is going to become less cushy, it threatens to pull the plug, close the smelter and walk away. It does so in the knowledge that it has always been deemed "too big to fail" by the succession of Governments, both National and Labour, that it has effortlessly outmanoeuvred for more than 40 years.
This time it is trying it on as a tactic to try to pressure Meridian over its power price contract, on which the ink is barely dry and which only took effect in January.
Campaign Against Foreign Control of Aotearoa (CAFCA) calls Rio Tinto's bluff (pun intended). Stop crying wolf, stop using your New Zealand workers as disposable pawns in your cynical game, stop holding Southland and the country to ransom. Go ahead and close the smelter and bugger off.
See if we care, the country will be much better off without you.
The smelter is the country's single biggest user of electricity, consuming one sixth of the total, 24/7 for more than 40 years. It pays a top secret super cheap price that is not available for any other user and all it does is export electricity from NZ in the form of alumina, while being subsidised by all other electricity users. The smelter is the textbook example of corporate welfare in New Zealand. It is the biggest bludger in the country.
How ironic that Rio Tinto has rejected the Government's offer of a short term subsidy. It wants a long term one, preferably indefinitely. Presumably, this is in addition to the massive taxpayer subsidy it has been receiving continuously for more than 40 years, in the form of the Manapouri power station built with public money for its exclusive use (and let's never forget that men died building that); and the cheapest and most secret power price rate in the country bar none. Not good enough apparently, it still wants more.
Rio Tinto won the 2011 Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand (and was runner up in both 2009 and 08). It was nominated for lobbying two Governments "over several years to secure excessive allocations of free emissions units under the NZ Emissions Trading Scheme".
The Roger Award judges agreed, concluding: "It appears therefore, that the New Zealand taxpayer is subsidising a transnational corporate rort of the emissions trading scheme. The significance of this stance cannot be underestimated; a major transnational player within New Zealand materially benefits from its non-compliance with a strategy to reduce global climate change and its ecological effects".
The Judges' Report concludes that the company has a 50 year history of "suborning, blackmailing and conning successive New Zealand governments into paying massive subsidies on the smelter's electricity; dodging tax, and running a brilliantly effective PR machine to present a friendly, socially responsible and thoroughly greenwashed face to the media and the public. Its milking of the Emissions Trading Scheme is entirely in character".
The extremely detailed Financial Analysis reveals that the smelter's claimed benefits to NZ, namely annual export earnings of "around $1 billion" are, in fact, overstated by four fifths.
The full, damning, 2011 Roger Award Judges' Report can be read at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/Roger2011.pdf
Rio Tinto is, once again, a finalist in the 2012 Roger Award, the winner of which will be announced in Wellington on May 1 (http://www.watchblogaotearoa.blogspot.co.nz/)
In short, it is a liability to New Zealand, not an asset.
What about the people who work for the smelter, directly or indirectly? Indisputably, the smelter closing would have a negative impact on Invercargill and Southland. But let's keep a sense of proportion - in disaster terms it doesn't compete with Christchurch having lost 185 lives, 50,000 jobs, and sustained $30 billion worth of damage in a matter of seconds on February 22, 2011.
If Christchurch can get back in the saddle after that, Invercargill should be able to handle the smelter closure and its attendant job losses. As a plus, the city will be able to shake off its unhealthily dependent situation as a company town with its local government at the beck and call of this transnational bludger.
The tobacco industry used to employ a lot of people here, but that was deemed to be no longer in the public interest. Lacing lollywater with booze and selling it to kids supports a lot of jobs too but there's plenty of public demand to get rid of that particular industry as well. The P industry provides an income for thousands of people too, but we don't hear any demand for that insidious trade to be kept going to keep them in a job. History is full of examples of horrible industries that kept people in jobs (such as the slave trade) but which were banned and/or abolished for the greater good.
This smelter constitutes a crime against the people of New Zealand and has done for its entire existence.
In the national interest, it must be closed and the sooner the better.
It would be a great bonus to have 15% of the country's electricity suddenly
available and no longer committed to one smelter. There would no excuse for
the moneygrabbing power companies not to cut their prices (we've been
falsely promised lower power prices since the "electricity reforms" of the
And, we're told, it would drive down Meridian's attractiveness to
would be buyers as part of the Government's assets sale process. How ironic
that the selfishness and ruthlessness of one transnational corporation could
bugger up the plans to flog off more of our public assets to transnational
Campaign Against Foreign Control of Aotearoa
Box 2258, Christchurch, New Zealand
Tracing the history of Tiwai Pt
7 April 2013
The aluminium refinery at Tiwai Pt has been called many things during its 50 years.
A bluffing North Korea using high-noon tactics and eyeball stare-downs to crumble successive governments at the knees; a roaring, rumbling surplus to requirements at the edge of the world; a great-for-Southland bad-for-the-country, dirty, no good trickster.
Like a poker player with a good hand, the bargaining power was always in its favour. Mostly, it knew how to get its way. As Meridian Energy chief executive Mark Binns put it to a select committee last week: "We are not dealing with grandma."
In 1970, Comalco reportedly issued preferential shares to prominent New Zealanders including politicians and judges.
In 1976, it lobbied for the United States, the United Kingdom and Australia to intervene after Robert Muldoon pushed for a 650 per cent rate rise. It got 350 per cent.
In 1986, it took the government to court for trying to raise its rates.
In 2008, it threatened to close the smelter if the New Zealand Emissions Trading Scheme went ahead.
Even the refinery's very existence was the result of brinksmanship tactics.
The long running saga that came to another head this week when Rio Tinto, the major shareholder of the New Zealand Aluminium Smelters Ltd, which runs the smelter, baulked at a deal with state-owned Meridian Energy, which owns the Manapouri power station. Rio Tinto wanted to renegotiate the terms of its agreement, saying once more that the deal was too stringent. It talked about walking away.
State Owned Enterprises minister Tony Ryall revealed on Thursday that the Government was talking to Rio Tinto about "helping to bridge the gap" or, in other words, subsidise the smelter's contract talks with Meridian.
"This is nothing new," said economist Geoff Bertram, who has followed the company for decades. "It's just an extension of what they have always done."
In 1960, the government and Comalco had an agreement for it to build both a smelter and a hydro-electric power station. In return, Comalco would receive exclusive rights to the waters of Lake Manapouri for 99 years. But Comalco never built the smelter; said it couldn't afford to. In 1963, the government picked up the slack, agreeing to build the plant and sell electricity to Comalco at highly reduced prices that have never been revealed.
Murray Horton, chairman of the Campaign Against Foreign Control of Aotearoa, has long trumpeted the demise of the Tiwai Pt smelter and the company that owns it.
"It's corporate welfare," said Horton. "They have always been the biggest bludger in New Zealand."
Now, he said, it was acting like "North Korea" - the threats might be for real or they might be a bluff.
The argument in favour of the smelter has long been the benefit it brings to New Zealand. Certainly it's a big deal in Southland. The company produces $525 million a year, or about 10 per cent of Southland GDP. It also consumes about 15 per cent of all New Zealand's electricity.
And, while people in Southland would lose jobs if it closed, Horton says some things just aren't in the national interest. Besides, Southlanders have been a happy hostage to Tiwai Pt, he says. They have painted themselves into a corner and become a company town.
Mayor Tim Shadbolt is unapologetic. Not only did he help build the power station, which claimed the lives of more than a dozen Southlanders, but he has called himself a "mercenary" and a "salesman" for his region.