By Rachel Clun – Re-Blogged From The Sydney Morning Herald
Gladstone’s Boyne Island aluminium smelter is set to shed jobs and cut $100 million-worth of production because of soaring Queensland power prices.
Boyne Smelters Ltd general manager Joe Rea said it was the second time in three years the facility had cut production due to “uncompetitive electricity prices”.
Boyne Smelters Ltd is set to shed jobs and cut production due to “uncompetitive” power prices. Photo: Boyne Smelters
“BSL is paying more than 500 times more than what it costs to generate electricity,” he said in a statement.
“The decision to curtail production is a very difficult one. It takes months, not weeks, to bring the smelter back to a stable full capacity, and that can only happen if and when power prices become competitive.”
The company predicts a loss of about 45,000 tonnes of aluminium production, worth about $100 million at the current exchange price. This loss in revenue will be offset partially by job cuts.
The Rio Tinto-owned BSL employs more than 1000 workers and another 120 contractors, but the number of jobs on the line is yet to be confirmed.
Mr Rea said the full impact of the cuts will be known “in the coming weeks”.
“We will leave no stone unturned to protect the jobs of our BSL employees, however, the curtailment of production means we can no longer sustain today’s workforce numbers.”
Most of the electricity used at the smelter is supplied by Gladstone Power Station in a secure long-term contract – the smelter owns 42 per cent of the power station.
The power station supplies 85 per cent of the smelter’s power needs. Mr Rea said the remaining 15 per cent of electricity the smelter needed to run at “optimum level” was at risk.
“BSL has been unable to secure an internationally competitive price for our additional load,” he said.
“It is an ongoing concern for our business that the trajectory for wholesale electricity prices in Queensland is a significantly increasing trend — doubling since October 2014. From January 1 this year, we saw a real upward change in spot market power pricing.”
During last week’s heatwave Queensland’s wholesale electricity prices soared to almost $14,0000/MWh. With temperatures set to stay high in Queensland over the weekend and into next week, the Australian Energy Markets Operator forecasts more high prices.
The surge in power prices comes at an inopportune time for the 545,000-tonne capacity smelter, as the price of aluminium remains low.
“The price for aluminium in Australian dollar terms remains lower now than during the global financial crisis. Electricity prices in Queensland and the recent bidding practices of generators are putting BSL jobs at risk,” Mr Rea said.
The Boyne Island facility is Australia’s largest aluminium smelter, and most of the aluminium it produces is used within Australia. The metal is used for products including door frames, window frames, and yacht masts.