Requiem for a smelter

Written By: - Date published: 11:58 am, July 9th, 2020 - 53 comments
Categories: Economy, uncategorized - Tags: , , , ,

New Zealand was always a odd place to have a aluminium smelter. The only natural advantage we had was a untapped hydroelectricity capacity at the bottom of the world. Thousands of kilometers from raw material sources. Tens of thousands of kilometers from the major markets.

Over time we developed our internal markets and other potential uses for that power. But not much for aluminium being produced in our deep south. Which means that as producers further north closer to customers developed the power resources, the end product became relatively cheaper and the margins for above production costs in NZ got tighter.

From BusinessDesk “Window still open for Tiwai Point – NZAS boss” (paywalled)

Controlling shareholder Rio Tinto today said it has given notice to terminate its contract with electricity supplier Meridian Energy, which ends at the end of August next year. That was the outcome of a nine-month strategic review of the business, which was meant to have been wrapped up at the end of March, but dragged on when the covid-19 pandemic turned the world on its head.

This time it looks pretty real. There was a strategic review by the NZAS and their owners after a 46 million dollar loss last year. But the problem is structural inside the market place.

The smelter was optimistic about the outlook in 2018 when it reopened its fourth pot line after a six-year spell and took on more staff in an effort to improve the viability of the operation, but has since struggled with a combination of low aluminium prices and high prices for alumina, a key input to the smelting process.

At the same time, it complained about the cost of energy, including transmission pricing. While the Electricity Authority’s recent decision for Transpower to adopt a user-pays model on the charges to access the national grid operator, shifting about $10 million of costs to other users, NZAS said that’s not enough to keep the operation viable.

The ANZ commodity price index this week showed aluminium prices rose 6.4 percent in June, but were still 10.9 percent lower than the prior year. And while economist Susan Kilsby said aluminium pricing was on an upward trend for now, she noted strong Chinese production will lead to increased stock levels in an environment of relatively subdued demand and could lead to those gains faltering later in the year.

It is extremely hard to see how doing anything with electricity prices will help. It will just make supporting the smelter further distort our own electricity market, and doesn’t seem likely to stop an inevitable closure. And New Zealand as a whole could use more available usable generating capacity. The smelter uses more than 13% of our total generating capacity.

The index price for residential power has more than doubled in real terms since 1999, and shows no signs of reducing its climb. For all of the excuses used over the years with the transfer pricing between industry and residential, the transmission issues, and so forth – the fact remains that the unit cost of power in NZ is steadily rising. This is reflected in the final residential power most strongly because that is a purely market driven.

figure.nz

That reflects that while our population is rising, especially over the last decade…

stats.govt.nz

Our generating capacity mix has changed, but our overall capacity has not.

figure.nz

Those power prices can only come down if more generating capacity is either added, or is released to more productive uses. Of course this will probably mean more investment into transmission lines taking power to Canterbury.

These days the inter island power linkage is a two way process. As an overview…

The HVDC link provides North Island consumers with access to the South Island’s large hydro generation capacity, which may be important for the North Island during peak winter periods. For South Island consumers, the HVDC link provides access to the North Island’s thermal generation capacity, which is important for the South Island during dry periods. Without the HVDC link, more generation would be needed in both the North and South Islands. In addition, the HVDC link is essential for the electricity market, as it allows generators in the North and South Islands to compete, putting downward pressure on prices and minimising the need to invest in costly new generating stations. The HVDC link also plays an important part in allowing renewable energy sources to be managed between the two islands.[47]

wikpedia

Freeing up the low cost hydro power generation to reduce the demand spikes in the whole of NZ electricity market should reduce the price spikes that are currently pushing the prices up in NZ to levels that are well above the OECD averages and costing the country as a whole very heavily.

figure.nz

Once the immediate issue has been solved, then we can have a look at why there is a market distortion that prevents the timely addition of capacity with the increase of population and economic growth. The ever increasing cost of electricity in a country endowed with potential capacity is a major productivity drain. So far the experiment of the deregulation of electricity supply in NZ looks more like an excuse to take profits from scarcity rather than something that fuels our economy.

The only real issue with the smelter leaving is how to soften the economic blow to Invercargill, Bluff and Southland as their economy restructures..

53 comments on “Requiem for a smelter ”

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  1. Kiwijoker 1
    9 July 2020 at 12:23 pm

    Time to renationalise the industry, get rid of the multiple CEO’s, communications teams, marketing teams and people exploitation departments, give the engineers and ops staff decent budgets and give Rio Tinto the flick. The years of subsidies to their shareholders needs to be assessed against the loss of employment in Southland.

    • Tiger Mountain 1.1
      9 July 2020 at 12:56 pm

      When you look at the lack of social dividend forthcoming from Rio Tinto, the environmental degradation, and that the jobs seem to have been highly subsidised by taxpayers and ‘consumers’, few will lament this corporate’s departure.

      I have read a lot of LPRENT pieces over the years on this blog, and he provides his typical wisdom, well spiced with data and trends. But I take a more emotional approach when it comes to international capital pillaging public resources.

      The Smelter’s activities were compounded by the artificial generation/supply/retail/wholesale market created out of publicly owned and developed Hydro/Thermal/Fossil infrastructure by National, and essentially supported by other parliamentary parties since. Return the whole steaming, parasitic mess to public ownership I say too Kiwijoker, compensation maybe, over a very long time.

    • UncookedSelachimorpha 1.2
      9 July 2020 at 1:20 pm

      There will be silver linings to this cloud, but hard for workers in the short term.

      All state intervention should be directly to the workers and their families, not to private shareholders. Money spent on power subsidies etc would be better spent on creating new employment and training. If the state does intervene to keep the smelter open, it should be in the form of a nationalisation so the public benefits from the state expenditure.

    • Iainz 1.3
      12 July 2020 at 9:35 am

      Totally agree. Absolutely on the money. Nationalize the industry. Economy of scale and so on. Too many fat directors fees and administration costs.
      Rio Tinto is trying to blackmail the taxpayers, again.

  2. Andre 2
    9 July 2020 at 12:30 pm

    One of the factors inhibiting the development of new renewable generation was the ever-present threat of Tiwai Point closing and flooding the market with cheap power. Who in their right mind would invest in new capacity with that sword hanging over them?

    Now that sword has dropped. When the dust settles, investment decisions can be made on a much more sensible and rational basis, and I expect to see the rapid end of fossil generation and more investment in new renewable generation.

  3. aj 3
    9 July 2020 at 1:02 pm

    Political timing perfect, if I may be so cynical as to suggest that.

    • tc 3.1
      9 July 2020 at 1:22 pm

      Yup IIRC their existing deal was sweetened by shonkys mob to assist in flogging meridian.

  4. Just Is 4
    9 July 2020 at 1:10 pm

    Most here will remember the protests around raising the lake Manapouri level, for the scheme.

    "So far the experiment of deregulation of electricity supply in NZ looks more like an excuse to take profits from scarcity rather than something that fuels the economy"

    Its a global phenomena where Electrical Generation has been sold into private hands. It a comodity and a basic necessity, a direct conflict of each term, power companies can literally charge as they like, if you're unhappy with the price you can always get it disconnected. Hardly a solution for a necessity in everyones life.

    For the good of the economy, Electricity should be sold at cost, it would make manufacturing more viable and profitable, people could use their heaters in winter without the fear of astronomical monthly bills.

    I read an article about 6 years ago about how America generates and supplies electricity, most customers pay cost price for electricity, so car manufacturers and industry are competitive globally, the domestic market payed the same cost price per unit of electricity, kwh, at that time in the US, a kwh was 4c per unit, in NZ today, most are paying arouund 35c per kwh plus a daily delivery charge or line charge. The line charge is a set rate, domestic users pay the same daily charge as the highest commerial users, a traversty if there was ever one.

    • tc 4.1
      9 July 2020 at 1:25 pm

      We're so gamed on what we pay in NZ for power. Solar input/output is even rigged to benefit them.

    • Draco T Bastard 4.2
      10 July 2020 at 2:50 pm

      For the good of the economy, Electricity should be sold at cost, it would make manufacturing more viable and profitable, people could use their heaters in winter without the fear of astronomical monthly bills.

      Nope. Every household/business gets a block of electricity free per month (amount adjusted for seasonal changes) and then everything above that is charged for at high rates to discourage excessive use.

      The free block per month is the reason why power needs to be nationalised.

  5. DS 5
    9 July 2020 at 1:29 pm

    Tiwai Point was one of the least carbon-intensive aluminium smelters on the planet. So this just exports greenhouse gas emissions overseas, while simultaneously undermining what is left of New Zealand's industrial base. Quite apart from Southland (a region of 100,000) people losing 1000-2600 jobs.

    It's times like this when much of the Left just reveals itself to be a different flavour of neoliberalism.

    • Andre 5.1
      9 July 2020 at 1:50 pm

      Nah, that least-carbon-intensive thing is just PR-weasel talk to try to make locals feel unjustifiably proud of the product in order to scam themselves some social licence to operate.

      Basically almost all of our emissions from fossil-fulled electricity generation in this country should properly be attributed to Tiwai Point. Because of they weren't sucking so much juice, we would hardly ever need to run any of the dino-power stations.

      Comments like this show that parts of the left reveal themselves as suckers for corporate con games and extortion via job hostage-taking.

      • Just Is 5.1.1
        9 July 2020 at 2:07 pm

        Andre, Correct me if I'm wrong, but power produced for the smelter was a specially built Hydro Scheme where they raised the level of Lake Manapouri for the specific use for the smelter as it used so much energy

        There were a lot of protests associated with raising the lake level, there were even a couple songs written criticizing the project.

        • Andre 5.1.1.1
          9 July 2020 at 2:14 pm

          So?

          We built and paid for it. It's ours, wholly and completely. It should be used for the best interests of the country as a whole.

          For a long time now there have been better things for our country to do with that electricity than padding the profits of a foreign company that leverages the jobs it holds hostage to extort ever more subsidies to further pad its profits.

          • Just Is 5.1.1.1.1
            9 July 2020 at 3:16 pm

            But Andre, you state that the smelter is run on "Fossil Fuels", it isn't, it's run on Hydro Electric Generation, you know, they build a dam, run a pipe line down a hill half a kilometer and use the subsequent head pressure to drive a turbine that generates ekectricity, the only ingedient is the water, which is captured in the lake and then transformed in electricity, the waste water carries on down the stream to the sea

            • Andre 5.1.1.1.1.1
              9 July 2020 at 3:36 pm

              Reading-comprehension-challenged, are you?

              Go back and read my comments slowly and carefully, and see if you can figure out how what I said is different to what you just claimed I said.

              For further insight into how Tiwai Point has messed up our electricity sector leading to increased emissions, have a look at my comment 2. Read it slowly and carefully.

            • xanthe 5.1.1.1.1.2
              9 July 2020 at 6:06 pm

              @Just is eeekkk go to wikipedia or whatever and read up about the manapouri hydro scheme . !

        • Marcus Morris 5.1.1.2
          9 July 2020 at 6:03 pm

          Not sure if I have read you properly Just Is. The massive Save Manapouri Campaign did just that and the government of the day backed down over the plan to raise the lake level.

    • Lettuce 5.2
      9 July 2020 at 2:00 pm

      Shipping alumina from Queensland and Northern Territory to be processed in Southland was never carbon neutral I'm afraid.

    • Just Is 5.3
      9 July 2020 at 2:12 pm

      Yes, it was a purpose built Hydro Electric power station, some still would've prefered to keep the environment, but that's history.

      It's the "Modern Left" must keep up with the times

      • left_forward 5.3.1
        10 July 2020 at 9:15 am

        Are you saying that the 'Modern Left' must keep up with the actions of capitalists?

        Not sure what you mean by the capitals and inverted commas – but these 'times', as you say, have been experienced since the dawn of capitalism; the workers and community from whom these capitalists have robbed profits, have once again been dropped because they are not making enough to satisfy the insatiable greed of shareholders.

    • aj 5.4
      9 July 2020 at 2:17 pm

      Rio Tinto has been contradictory. On one hand wanting to wave green credentials by getting out of carbon intensive power (and using as an example the way it's plants are powers in Australia which, they said, were also under review)

      And then it does this. I suspect the motive for today's announcement is an all-in bet, to extract a fold from the other players which were in contract talks. Hardball, and yes they will walk away if they don't get what they want. Make no mistake, prices will at some point bounce back and despite shipping, something every smelter faces – windfall profits for good smelter operators will resume.

      • Andre 5.4.1
        9 July 2020 at 2:27 pm

        I suspect the smelter operators that will come out on top of this are the ones that figure out how they can run potlines using extremely cheap solar power. Allegedly new photovoltaic installations are coming in at prices under USD0.02/kWhr – that's just over half what Tiwai Point was rumoured to be paying. Concentrated solar electricty pricing has dropped massively too, although not quite that low.

        Dunno whether the answer will be in figuring out potlines that just run when there's lots of cheap juice and just stay warm overnight, or they figure out storage for the solar energy one way or another.

  6. Lettuce 6
    9 July 2020 at 1:53 pm

    "The only real issue with the smelter leaving is how to soften the economic blow to Invercargill, Bluff and Southland as their economy restructures."

    Sometimes these things have a way of working themselves out:

    https://www.stuff.co.nz/southland-times/118806207/alliance-group-will-employ-100-migrants-for-seasonal-work-in-southland

    Quoted from the article linked above (January 2020)

    "Southland has one of the lowest unemployment rates in the country and the labour market is only getting tighter. Like many employers in the region, Alliance experiences staff shortage across all areas of our processing operations," Selbie said.

    • Draco T Bastard 6.1
      10 July 2020 at 2:56 pm

      Ah, so importing people from elsewhere is to keep wages down – understood.

  7. Mpk 7
    9 July 2020 at 1:56 pm

    “So far the experiment of the deregulation of electricity supply in NZ looks more like an excuse to take profits from scarcity rather than something that fuels our economy.”

    Yes and this isn’t just limited to the likes of Rio Tinto but also applies to the culture at Meridian where the profit motive is primary and 100% renewable just advertising to gain market share. They have recently been found guilty of dumping “fuel” ie water to drive up the spot market and in the process cause the burning of large quantities of fossil fuels all in the pursuit of profit.

    https://www.rnz.co.nz/news/business/420160/meridian-spilled-water-to-hike-electricity-prices-authority-ruling

  8. Wayne 8
    9 July 2020 at 3:50 pm

    Iprent,

    New Zealand is not an odd place to have a smelter.The most expensive part of the aluminium smelting process is the energy, specifically in the form of electricity. Hence the importance of the power cost.

    The smelter was in Southland for the same reason smelts are in Iceland, cheap electric energy. In both cases derived from an abundant natural source. The electrical plants are expensive to build, but are super cheap to run. The capital cost of Manapouri was recovered decades ago. Meridian makes a high profit from selling bulk power direct to the smelter. Yes, it is way cheaper than for any other use, but what other user can take 600MW 24/7? The answer is none.

    No wonder the share price of Meridian has dropped so much today. The market knows that Meridian cannot sell that power (continuous baseload using 80% capacity of Manapouri) in that form to any other user.

    The left (including you) has always been against the smelter for a variety of reasons. Including multinational ownership of the smelter, a fundmentally wrong view about power pricing, and for environmental reasons. These include bauxite being a mined resource, that the smelter is form of heavy industry, that there are waste product issues, and so on.

    However, the loss of the smelter will be a net loss for New Zealand. Firstly, 3000 Southland jobs will disappear, second, there is no other market for this power, not without expensive new transmission costs, and third, a loss of billions in foreign exchange.

    • froggleblocks 8.1
      9 July 2020 at 4:54 pm

      Supposedly the cost to upgrade the lines in the South Island to dispatch the power is about $100M and the plant has been getting $48M per year in ETS subsidies.

      It'll take 3 'summers' to build the infrastructure to dispatch the power, by which time we would have saved $144M in ETS subsidies against a project cost of $100M, which will be providing construction jobs in an economic environment where every job counts.

      • Wayne 8.1.1
        9 July 2020 at 5:29 pm

        I don't believe the $100 million cost, not for main transmission lines taking 700Mw for several hundred kilometres.

        The ETS subsidy is not what you think. It is the state not taking the full ETS payment from the smelter. Instead the smelter pays a much reduced amount. Remove the smelter and the payment to the state is zero. In short, when the smelter closes the state actually gets less than it gets now.

        I would note that this is the case with all ETS industrial subsidies. If say cement production paid the full ETS payment right now, cement would increase in price by around 10%, or maybe a lot more. Now is not the time to increase the costs of industry.

    • observer 8.2
      9 July 2020 at 5:09 pm

      So why did Bill English refuse to keep bailing them out?

      “They certainly wouldn’t get another bite of the cherry from this government”

      https://www.odt.co.nz/business/tiwai-pt-power-deal-one-english

    • Muttonbird 8.3
      9 July 2020 at 5:48 pm

      We could have a 600MW permanent light show over Queenstown and Lake Wakatipu.

      We could permanently light the Remarkables, Ben Lomond and Cecil Peak at night as an other worldly, never been done before tourist attraction.

    • aj 8.4
      9 July 2020 at 6:28 pm

      Wayne, is it worth another $30m gift? Bill English said 'no more'. Has his calculation changed? or is just a political/social calculation.

      • Wayne 8.4.1
        10 July 2020 at 6:32 am

        Yes, it is worth another $30 million, last paid in 2013. Say $4 million per year. Pretty cheap for 3000 jobs.

    • lprent 8.5
      9 July 2020 at 7:06 pm

      New Zealand is not an odd place to have a smelter.The most expensive part of the aluminium smelting process is the energy, specifically in the form of electricity. Hence the importance of the power cost.

      The smelter was in Southland for the same reason smelts are in Iceland, cheap electric energy.

      Which is precisely my argument. It is only part of the cost albeit, in the 1960s the most expensive part.

      In Iceland, as I remember it, the bauxite comes from Canada and the main markets are North America and Europe. In all cases the transport of raw materials and finished goods is mere hundreds of nautical miles. That is also a cost and their power costs are similar to those in NZ. So which is inherently more profitable – obviously the smelters with fewer other costs.

      I'm pretty sure that if the Japanese (the main market for Tiwai then and now) didn't have a rabidly hostile China back in the 1960s then they wouldn't have invested in Tiwai Point. China has abundant bauxite sources, many places to get cheap power from, and a potentially vast internal market. Moreover it was very close to Japan.

      That is why I said that New Zealand was an odd place to have a smelter. That it came here was a direct result of a geopolitical snafu.

      Meridian makes a high profit from selling bulk power direct to the smelter. Yes, it is way cheaper than for any other use, but what other user can take 600MW 24/7? The answer is none.

      A single user cannot. A lot of users can. Clearly I will have to explain this to a technophobic child….

      A lot of users can use power in different locations because there is this curious concept in power generation called a power transmission grid. It allows power to be generated in one place and used in another. For instance Tiwai Point uses power from 146km away over a special transmission line that put in for the purpose. If there is capacity on transmission lines, then that power could be instead sent to Dunedin 253km away, Christchurch 479km away, or even Wellington 766km away. The power that those destinations are currently sourcing can then be sent to other locations.

      There is a cost in transmission where there are losses largely expressed as heat due to line resistance. In total this is currently about 6.5% cross the whole network. Pushing power longer distances will increase this a bit. But nowhere as much as the 13% of power currently squandered on Tiwai Point with little real return to the whole of NZ who made the investment in the plant providing that power.

      Fortunately we have a system called a electricity market (or previously a possibly economically more efficient system called electricity planning that wastes less value in providing 'profit' by raising prices) that tries to use the power as efficiently as possible and to reduce losses.

      How much users other than Tiwai Point could use and what productivity increases can be gained from it are simply unknown because of piss-poor economic policies about electricity infrastructure since power deregulation in the late 90s (and to a lesser extent – before).

      There hasn't been any significiant increase in generating capacity since 1999, and increasing population. This has meant that we have kept increasing the price of power in real terms – while in real terms the price of the power to Tiwai Point has been dropping.

      Every improvement in productivity of the use of power by the rest of the economy has been sucked up by increased power prices. My household uses about half of the power it did 12 years ago because I buy everything with and eye to power efficiency. In that 12 years my monthly power bill in real terms has increased by about 50%.

      That is almost entirely due to the fact that out population has increased by nearly a quarter in that time, and there has been no increase in generating capacity. This is directly reflected in both the slowly skyrocketing contract and spot prices in the electricity market. Tiwai Point chews up 13% of our total generating capacity at a small fraction of the price that it could get on electricity market as a stable base load source of power. Yet your a

      That is a massive direct cost to New Zealand. It is also a constraining factor to all industry and residential uses. If you figure out a way to use power more productively and in quantity – your cost structure will increase because there is no spare capacity in the system. The reason why is because no-one is willing to put in more capacity when 13% of the capacity is being frivolously wasted on employing a few thousand people and giving a inherently economically unsustainable plant benefits that aren’t given to the rest of the citizens and business of the country.

      This has to be obvious even to a simple idiotic lawyer like you with a limited sense of history and an obvious lack of any technical training. But even a lawyer should know that lying about motivations without research is bloody dangerous.

      The left (including you) has always been against the smelter for a variety of reasons. Including multinational ownership of the smelter, a fundmentally wrong view about power pricing, and for environmental reasons. These include bauxite being a mined resource, that the smelter is form of heavy industry, that there are waste product issues, and so on.

      Yeah right. I've worked as some kind of engineer or manager for almost all of my working life. All 46 years of it.

      I have a BSc in earth sciences with focus on geology. I spent time looking if I wanted to work in mining but decided to try technical management instead. I have no problem with mining – it all gets recycled eventually anyway. Nor do I have a problem with factories or manufacturing plants. Hell- one of my first jobs post uni was to do scientific/engineering calcs on Tiwai and other think big projects. Besides I have a MBA with a focus on operations and production. I have worked on heavy industry (as far as we have it here), light industry, and services. I started off working in technical sales to heavy industry and light industry production roles.

      Sure these days I work as a very software engineer / programmer for a multinational because I like being a serious geek and avoiding management. But also because I prefer to work in the export markets where life is competitive, the transport costs are minor, and also because less full of the unskilled fatuous National supporting loudmouths of the domestic economy. They really are kind of stupid to be around because they love myths more than reality.

      But hey, if you want to stick your head up your National crony arse so you can justify your inability to think. That it doesn't bear any relationship to reality shouldn't worry you. It just reinforces my default opinion that many National supporters being fools who are so full of their own bullshit that they really aren’t capable of listening to others.

      • Wayne 8.5.1
        10 July 2020 at 6:36 am

        Iprent,

        Are you congenitally unable to debate a subject without copious insults.

        Why would you assume I have no idea of how the transmission system works.

        • lprent 8.5.1.1
          10 July 2020 at 10:05 am

          Why would you assume I have no idea of how the transmission system works.

          Because you seemed to have completely ignored it in your analysis about what could be done. After all what other conclusion could one take with..

          …but what other user can take 600MW 24/7? The answer is none.

          It was a rather glaring omission.

          Incidentally, I could suggest some attributes of dams as a device for the storage of potential power.

          I’m never charitable when people assert unsubstantiated facts by carefully ignoring relevant factors in the pursuit of a pre-defined talking point. I never find that allowing slogan politics to stand is useful for robust debate, online or otherwise.

          Plus I get very irritated when people attribute opinions or actions to me either directly or as a purported member of group – especially when they are just made up and completely incorrect. Curiously I find that those who are in love with that kind of stupidity don’t deserve my respect. I like to make sure that they understand that. So I usually just reflect the same back to them – with a bit of enhancement.

          I guess that is what you refer to as ‘copious insults’. If you don’t want to receive them, then I’d suggest that you don’t use them yourself.

        • JohnSelway 8.5.1.2
          10 July 2020 at 4:27 pm

          He also doesn't seem to be able to post anything without referencing he has an Earth Sciences degree and an MBA..oh and that he is a programmer. Every time I see an LPrent post I play a game with myself betting he'll mention one or all three of the the above statements at least once. So far I am always winning.

          Why do you do it? It's a really weird habit of yours

    • Kiwijoker 8.6
      9 July 2020 at 7:50 pm

      Ok, so Rio Tinto sit on the rh of the almighty,but when jk bought the bs and flicked them 30 mil he obviously ignored the fact they pulled the same stunt in Kenya.

    • Draco T Bastard 8.7
      10 July 2020 at 3:01 pm

      Yes, it is way cheaper than for any other use, but what other user can take 600MW 24/7? The answer is none.

      And there you prove that you don't understand economics at all. There's only supposed to be one price, the market price, for electricity. Not different prices for different customers.

      Having different prices for different customers defeats the pricing mechanism and thus results in a misallocation of scarce resources.

  9. millsy 9
    9 July 2020 at 4:34 pm

    The workers will be well looked after, with what I assume will be generous redundancy payments, especially for the older workers, and plenty of notice for them to plan for the future.

    I think we should be glad of that if nothing else.

    Hopefully there will be a plan to clean up the site and not just let the whole thing sit there for the next 30 years and just slowly fall down.

  10. observer 10
    9 July 2020 at 5:19 pm

    When a major employer announces closure and job losses, any opposition – to any government – would be slamming the decision and scoring points.

    A whole day has gone by and National's leader has not said a word. Even though he gave a major speech today, he has said absolutely nothing about Tiwai.

    Translation:

    "We would have let it close too, but luckily it hasn't happened on my watch."

  11. xanthe 11
    9 July 2020 at 6:18 pm

    Just learned on Prime news that the smelter lost 46million last year due to high electricity prices.. ! So glad the public of NZ have had that explained to them !

    • lprent 11.1
      9 July 2020 at 7:15 pm

      It is a marginal enterprise. The commodity price paid for refined aluminium has reduced by more than 10% last year.

      I think it is down by more than 20% since the start of 2018. This is because there are cheaper producers world wide who have similar power prices and who are closer to the source of bauxite and end markets.

      That is why they lost money. It wasn't the cost of the power which is tiny per unit. It is that they are selling for less than the cost of production.

      This isn't exactly news. NZAS and its predecessors has been wandering in and out of profit and trending towards the downward side for decades.

  12. Descendant Of Smith 12
    9 July 2020 at 8:22 pm

    "The smelter’s electricity transmission costs had risen from $40m in 2008 to $65m last year."

    A statement like this without any context is just nonsense.

    You are supposed to assume I guess it is because power prices rose – I'd assume it is because they used more power and produced more aluminium.

    • Andre 12.1
      9 July 2020 at 8:56 pm

      It's a mix of transmission pricing increase and more power being used. The transmission charges are separate from what they pay to Meridian (and Contact since 2018 IIRC) for the actual electricity they use.

      I haven't got my head around how Transpower actually sets their charges, but part of it comes down to when they complete investments into the grid they are allowed to increase transmission charges to pay for the upgrades. A lot of upgrades were done between 2008 and last year, but none of that (that I know of) was on the link between Manapouri and Tiwai Point. So there is a bit of an argument that some of the increased transmission pricing was for upgrades they got no benefit from but still had to pay for.

      However, IIRC in 2018 they also restarted the fourth potline and signed up with Contact to take electricity to run that fourth potline from the rest of the grid. That restart coincided with a jump in spot market prices, but it also meant the Tiwai Point was now a substantial user of the rest of the grid which they should reasonably be expected to contribute to.

  13. Pat 13
    10 July 2020 at 7:13 am

    There is a simple question to answer…at what point do you cease to consent to being blackmailed?

  14. rrm 14
    11 July 2020 at 7:25 pm

    then we can have a look at why there is a market distortion that prevents the timely addition of capacity with the increase of population and economic growth

    Three words:

    Resource

    Management

    Act

    As long as snail lovers, salmon fishermen and kayak paddlers can veto any new power scheme by writing a letter, that will continue to happen.

The server will be getting hardware changes this evening starting at 10pm NZDT.
The site will be off line for some hours.