More than 1,000 jobs will be lost in New Zealand after mining giant Rio Tinto said it would close an aluminium smelter at the bottom of the South Island.
New Zealand Aluminium Smelters (NZAS), at Tiwai Point will close in August 2021 after a strategic review found the business was not viable.
The smelter uses alumina from refineries in Queensland and Western Australia, and exports 90% of its product. It is also New Zealand’s biggest consumer of electricity, using roughly 13% of the country’s power, and one of the country’s biggest single-site employers.
The smelter was given an exemption to continue operating through the Covid-19 lockdown, but the deteriorating outlook for aluminium use sealed its fate. A $NZ46m ($A43m) loss last year prompted a review of its operations, the company said, though the New Zealand government insisted the smelter’s fail bid to secure more subsidies was the real reason behind the closure.
Rio Tinto Aluminium’s chief executive, Alf Barrios, said: “It is very unfortunate we could not find a solution with our partners to secure a power price reduction aimed at making NZAS a financially viable business,” he said in a statement on Thursday.
Southland mayor Tim Shadbolt said he was “utterly shattered” by the closure. Many Southland families have worked at the smelter for generations.
“Everything is sort of up in the air,” Tim Talamahina told the Southland Times. He has worked at the smelter for 20 years, like his father, and said Rio Tinto had provided generous, steady employment.
“I guess you are going to have 1,000 people looking for jobs now in such a small place. Who knows what is going to happen.’’
Southland locals told the paper the economic impact would be huge, and many would lose their homes. The shutdown was “devastating” for such a small community, and would take years to recover from.
Finance minister Grant Robertson said given the challenging economic situation caused by Covid-19 it was “disappointing” that Rio Tinto had decided to close the smelter, “ especially given the support New Zealand has shown the company and how profitable they are globally”.
“There is a degree of inevitability to the decision,” Robertson said in a statement. “Since the smelter opened taxpayers have been subsidising Rio Tinto to keep it open, either directly or indirectly through cheaper power, and Emissions Trading Scheme allocations of over $48m per year. The company has made the decision not to keep operating without further subsidies.”
Energy minister Megan Woods said the closure would eventually mean cheaper power for New Zealanders.
“Eventually, it will free up around 13% of total power generated in New Zealand which will relieve some pressure to build new generation. The increased supply will also have a positive impact on prices,” Woods said. “It is disappointing that Rio Tinto is deciding to close one of the world’s lowest-carbon aluminium smelters, in favour of keeping open coal plants.”
NZAS said it contributed $NZ406m ($A381m) to the rural community of Southland’s economy each year.
Dr Anna Berka, a lecturer in management, entrepreneurship and innovation at Massey University, said
The closure would have “ripple effects on the entire energy sector.”
The government said it expected the company would meet its obligations to clean up the site – at an estimated cost of NZ$256m – and “do the right thing” in handling the dross waste product.
Greenpeace executive director Dr Russel Norman said the closure would release a huge amount of low-carbon and affordable power back onto the grid, and blew any case for new coal, gas or oil development “completely out of the water”.
“The argument for more fossil fuel exploration, extraction and generation is over,” Norman said. “These companies haven’t been looking out for the team of five million.”
Opened in 1971, the smelter was expanded as part of former prime minister Robert Muldoon’s “Think Big” interventionist nation-building economic strategy.
Last year, the company was accused of not taking care of its byproduct waste after floodwaters nearly created a crisis at a waste storage facility in the nearby town of Mataura.
NZAS is a joint venture between English-Australian company Rio Tinto and Japan’s Sumitomo Chemical.