Doubt grows about Aramoana smelter

Press, 15 October 1982, Page 1

Doubt grows about Aramoana smelter

Parliamentary reporter

The likelihood of the aluminium smelter at Aramoana going ahead appeared to diminish even further yesterday.

Both Fletcher Challenge and Pechiney, the French technological partner in the South Pacific aluminium consortium, were concerned about the state of the world economy and the state of the aluminium industry in particular, said the Minister of Energy, Mr Birch. This was the main point to come out of discussion with Pechiney’s chief negotiator, Mr Michel Jaoul, yesterday, Mr Birch said.

Pechiney wanted to have discussions with Government Ministers about the state of the world economy and the aluminium industry before the smelter negotiations were taken any further, he said.

In spite of this, Mr Birch said, the French delegation would continue discussions with Government 1 officials about ’ the power-pricing agreement before leaving New Zealand on Tuesday.

However, because of the state of the world economy and the aluminium industry, Pechiney was reluctant to make a commitment to the smelter even if progress was made on the power-pricing negotiations. The aluminium industry

was one of the worst hit in the world. A number of plants had been closed because the aluminium could not be sold and many plants had to sell the metal below cost, Mr Jaoul said. “In those circumstances, deciding to go ahead and build a smelter is a difficult decision,” he said.

Pechiney wanted to see an upturn in the world economy before making a commitment to the project. Even if the Government was prepared to agree to a substantially lower power price, Pechiney would not be prepared to set a date for work to start on the smelter. “The reason we are here is because we are still interested in building a smelter. When that can be done, I do not know,” Mr Jaoul said. Mr Birch said it was difficult to see at this stage when the product from a second New Zealand aluminium smelter would be required.

“We have got a very difficult world economic situation and the industry is not prepared to make that investment at this time,” he said.

Pechiney was not the only

company in this position. Other companies were experiencing the same difficulties. It was more difficult now to say when a commitment to the smelter should be made than even a few months ago. because the state of the world economy had changed. Yesterday’s discussions had also covered the “very few” outstanding matters on the power-pricing contract, said Mr Birch.

“We have agreed to try to get greater clarity into the respective positions of the parties before the Pechiney delegation leaves on October 19,” he said.

Asked if a suggestion that the Government was prepared to accept a 5 per cent rate of return on the project rather than its usual 10 per cent, Mr Birch said that the issue of whether the project was a good one was more important than the rate of return.

“We would want to be satisfied that we would get a satisfactory rate of return for the resource. It is not a matter of achieving 10 per cent or 5 per cent or anything else,” he said.