Coal price increase causes dismay

Press, 14 March 1985, Page 3

Coal price increase causes dismay

The Canterbury Manufacturers’ Association and the president of the Canterbury Growers’ Society have reacted sharply to the annoucement that the price of coal will increase on average 35 per cent on April 1.

The director of the Canterbury Manufacturers’ Association, Mr lan Howell, said that industry was “dismayed” at the increase "especially when the Government is calling for responsible price restraint.” He said the increase was a serious problem for some Canterbury manufacturers, including seven big companies, three of which exported more than $26 million of manufactured goods each year.

“We are hopeful that the local increase may not reach a 35 per . cent level because of the competition from some private coalmines,” Mr Howell said.

A recent survey by the association showed that for two of the companies the coal price increase was of vital significance, because they used large quantities in their production. Three others regarded the coal price increase as significant as far as production costs were concerned. Mr Howell said that three of the companies planned to increase their coal useage in spite of the increase because of planned plant expansion, conversion from oil-based fuels and the increase in production capacity. General economic conditions, the price structure and expansion in North Island plants were given as the reasons the other four will keep their consumption static.

“If, however, the companies had access to a cheap energy such as North Island natural gas they would have considerable opportunities for greater expansion and job creation here in Canterbury,” Mr Howell said.

"On a comparative energy basis, coal will cost 2.3 times more ’ than North Island natural gas,” he said. The president of the Canterbury Growers’ Society, Mr G. D. Gargiulo, said his own coal bill would rise $12,000 to $16,000 a year, for his Harewood tomato-grow-ing enterprise. “I have just got to be more efficient; try to grow a better crop and cut other corners,” Mr Gargiulo said. He said that about 100 growers of tomatoes, flowers, and cucumbers would be affected by the coal price increase. “They will lose a bit more of the profit going down the spout. You don’t recover from that,” he said. “I think the mines, instead of just passing on the increase, should look internally and become more efficient.”

New individual prices for the four grades of coal have not been released, but the general manager of State Coal Mines, Dr Roger Blakeley, said that increases would vary between grades, NZPA reported. The president of the Coal Merchants’ Federation, Mr Horace Russell, said that coal prices were about $64 or $65 a tonne. The coal

price last increased on April 1, 1984, and is subject to annual reviews. Bulk users would be hardest hit by the rise, Mr Russell said.

The Ministry of Energy’s Electricity Division and New Zealand Steel would both face bigger increases a tonne than domestic users, because they were the reason for the increase, he said.

“Because of their huge demands more mines have been and are being developed. This means rising operating and development costs,” Mr Russell said. State Coal Mines has been running at a loss for many yars, having made a profit in only three of the last 20 years.

Its 1984-85 budgeted financial statement provided for a loss of $37.6 million for the year, and the director of the Mines Division, Mr Bill Partel, said that the assets of State Coal Mines and almost all its losses were funded entirely by borrowings from the Loans Account.

He issued a warning last October that a substantial increase in coal prices would be needed to reverse the rapidly deteriorating financial position.