Smelter 'in really difficult situation'

COLLETTE DEVLIN AND FAIRFAX NZ
Last updated 05:00 10/08/2012
Ryan Cavanagh
ROBYN EDIE/Fairfax NZ
EVERYTHING UP FOR GRABS: NZAS general manager Ryan Cavanagh, who is looking at all options to improve the smelter’s profitability.

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The Tiwai Point aluminium smelter near Bluff is "in a really difficult financial situation" and is not ruling out staffing changes to secure its future, NZAS management say.

NZAS general manager Ryan Cavanagh said no stone would be left unturned as part of a plan to maximise revenue, which included changing their contract with state-owned electricity provider Meridian Energy.

Meridian Energy was approached by Pacific Aluminium, a business unit of Rio Tinto Ltd, to discuss potential changes to the electricity contract with the smelter.

In April, high spot power prices forced the smelter to remove reduction line No 4, cutting capacity by 15 per cent.

Mr Cavanagh said the reduction in production capacity partially led to discussions with its energy provider.

"The aluminium industry is facing tough market conditions in the form of extremely high spot power prices, low aluminium prices and a high exchange rate".

The cut in production could be permanent, he said.

"We can't rule anything out, it's a tough market, all costs are under review to increase revenue," he said.

In a media statement Mr Cavanagh said NZAS was "leaving no stone unturned" as it tried to make the smelter resilient in market conditions.

The smelter was continuing discussions with many of its key suppliers and stakeholders, including its power supplier, he said.

In a release through the NZX debt market, Meridian Energy said discussions were ongoing and remained confidential.

When Mr Cavanagh was asked what implications "no stone unturned" would have at the smelter and if staff would be affected, he said: "We are in a really difficult financial situation. Everything is up for grabs, we are making changes in all areas to ensure NZAS remains viable in the long term".

Staff restructuring, as part of the role reduction programme through natural attrition, was continuing, he said.

Staff were told in November that positions would not be filled when staff left and it was expected about 100 jobs at the smelter would go during the next five years. The export-based smelter employs about 800 people.

When prompted about possible redundancies, Mr Cavanagh said: "We are exploring all options to maximise our position. That is all I can say".

He said the smelter was not planning to wind up its operations, and the actions of NZAS were to secure its long-term future.

The smelter was put up for sale by Rio Tinto last year, but with world aluminium prices slumping 29 per cent in the past 12 months, Rio Tinto has said it was in no rush to sell.

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