Gas cartel lays waste to aluminium industry

Here we go, via AFR:

Australian smelters are struggling under high power costs and weak aluminium prices, and their reliance on fossil fuels is also becoming a competitive disadvantage, with Alcoa signalling that reducing its carbon footprint was an important goal of the “review” under way into almost half its global smelting fleet.

…Federal Education Minister Dan Tehan vowed to do ”everything” in his power to save the smelter, which employs more than 400 people in his electorate.

…Rio Tinto operates aluminium smelters near Gladstone in Queensland, Newcastle in NSW and Bell Bay in Tasmania, and warned in August that those smelters were “on thin ice”.

…”We’ve been clear that Australia’s shrinking capacity to generate reliable energy has been a major cause of rising household power prices, and that there is a fine balance between market supply and demand, particularly in Victoria,” EnergyAustralia markets executive Ross Edwards said.

Energy Australia is run by Catherine Tanna, probably the single largest single influence behind the creation of the east coast gas cartel which caused power prices to rise in the first place. She then moved to downstream markets to enjoy the next phase of energy profiteering in power. Energy Australia can hardly bleat.

On top of this, the Portland smelter receives massively subsidised power. So if this is costing anybody, it is a mounting bill for tax-payers.

So what should and will happen here? The recent record of government sponsored sweetheart gas deals for failing manufacturers like Gibson Island hints that more energy bailouts may come for far flung constituents. If so, some kind of national strategic plan for who survives and why would be useful. It should consider Australia’s extreme industrial hollowing out,  as well as the strategic role played aluminium production, plus the trade-offs for the wider economy. I won’t hold my breath.

If governments do go the piecemeal bailout route, they are only locking in subsidised energy shortages for everybody else, households and wider business. Portland consumes 10% of Victorian electricity as it heads for massive gas shortages in a few years:

But that ignores the role of the gas cartel in triggering this crisis in the first place. The real answer is to sheet the blame home there and apply gas reservation to crash all utility prices everywhere, providing a massive competitiveness lift to the aluminium industry as well as wider business, and income relief to households

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Comments

  1. Politicians lay waste to aluminium industry, would have been my headline.

    Absolutely they should implement national gas reservation so Aussie public don’t have to pay the bill! Come on Australia wake up!

    • St JacquesMEMBER

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  2. I reckon they’ll close…

    Sensible people would address gas reservation, and thus collapse power prices….but, no, we are ‘Straya, and the Oligarchies must be formed and protected…

    The people really are suffering, and our leaders lack vision…and I mean real vision, not just Trumpy vagueries and projections.

  3. HadronCollision

    The worst thing about this is MBs careful clear and consistent messaging on this gets no cut through with people on the ground so they continue to vote for the entrenchment of BAU

    Need an MB party srsly and no the Judean peoples front of sustainable partying isn’t it