Power rise to cost smelter $20M p.a.

Press, 1 April 1985, Page 4

Power rise to cost smelter $20M p.a.

PA Invercargill A 22 per cent electricity price increase,. effective from today, will damage the competitiveness and viability of the Tiwai Point aluminium smelter, says the general manager of Comalco’s smelting division, Mr M. B. Bennett. Whether it should continue at capacity was under close review, he said. Comalco, the big partner in the smelter, was seriously concerned about the impact of the increased charges, Mr Bennett said. The increase would add about $2O million a year to the smelter’s costs and would more than offset recent efforts by the company and its employees to improve the smelter’s cost competitiveness and efficiency, he said. Asked if this could mean that the partners might cut

capacity at the smelter, which produces 244,000 tonnes a year, Mr Bennett said: “No decision has been taken on that, but the situation is being kept under close review.”

Any decision would depend on how well the smelter competed at capacity in the present “tough international markets.”

The electricity price increase could not be justified by normal increases in electricity supply costs and was, in effect, an additional tax on all electricity consumers, Mr Bennett said. As the aluminium industry world wide was oversupplying, and facing continued depressed prices, any loss of competitiveness reduced the smelter’s ability to maintain capacity production, especially as the smelter participants had in-

curred substantial loss from it in recent years, he said. The tough industry conditions had been reflected in February when Comalco cut the production of its Goldendale smelter in the United States one-third, with considerable redundancies.

If production at Tiwai Point was reduced, redundancies would be inevitable among the 1450 staff. When the 22 per cent power increase was announced last year, along with a 25 per cent increase in the bulk tariff to electrical supply authorities, the company protested to the Minister of Energy, Mr Tizard, and the Minister of Finance, Mr Douglas.

Mr Bennett said smelter and Ministry officials had been discussing pricing since halfway through last year, and he expected the talks would continue.