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New Zealand: Continuing uncertainty over Tiwai Point Smelter

Various news reports are suggesting a great deal of continuing uncertainty surrounding the future of the Tiwai Point aluminium smelter in New Zealand.

The plant, which is part of Rio Tinto’s Pacific Aluminium stable of smelters, predominantly located in Australia, is struggling to negotiate a new power contract amid rumours that Southland, where the plant is located, is preparing for the worst as officials consider other industries they might be able to attract to the region – should Tiwai close – and even the possibility of selling the smelter to the Chinese.

Kerry McDonald, CEO of the smelter when owned by Comalco (from 1988 to 2003) said that the plant was no longer as important to the New Zealand economy as it used to be, adding that there should be concern about the long-term future of the plant.

McDonald added that ‘when the smelter closes it will be a significant loss’. However, he said a short-term compromise would lessen the disruption caused by an immediate shutdown and argued that the Government should subsidise the plant in the short-term.

Stewart Hamilton of NZ Aluminium Smelters, which is 79.36% owned by Pacific Aluminium and 20.64% by the Japanese Sumitomo Chemical Company, said a commercial agreement was still not out of the question.

Richard Hay, CEO of the Southland Chamber of Commerce, said closure would be catastrophic, claiming that the smelter accounts for 30% of GDP and 40% of the region’s exports.

If the smelter closes, according to one news report, the region would lose 3% of its population and 8% of its GDP. According to NZ Aluminium Smelters, the plant contributes $525 million to the Southland economy (10.5% of GDP) and is responsible for 3,200 full-time equivalent jobs.